DEF 14A 1 d806083ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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Check the appropriate box:

 

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Definitive Proxy Statement

 

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THE BOEING COMPANY

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Table of Contents

 

LOGO


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Message from Our Chairman

 

To my fellow shareholders:

 

LOGO

  

As your board chairman, I stand with Boeing’s people in mourning the lives lost in the Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents. We are deeply humbled by these tragedies and committed to fulfilling our responsibilities to all of our stakeholders.

 

Your board and management team are dedicated to restoring trust with airline customers and the flying public, our employees, global regulators and our shareholders. We recognize this renewal begins by staying true to our word, listening and delivering positive, lasting change.

 

Over the past year, our board and our company have done this in several ways. In addition to transitioning company leadership, we created a permanent Aerospace Safety Committee to oversee the design, development, manufacturing, operation, maintenance and delivery of products and services. Inside the company, we are installing

a new design requirements program that will ensure we act on lessons learned and continuously improve. We are also adding new safety roles and expanding safety reporting systems both inside Boeing and within our supply chain. In addition, we are looking for new ways to enable and prioritize actions that improve safety, strengthen our culture and help us meet customer commitments.

 

We have a strong mix of expertise and tenure on our board today. Since our last annual meeting, Admiral John Richardson, the 31st Chief of Naval Operations for the U.S. Navy, has joined our board, and we are pleased that Akhil Johri, former Chief Financial Officer of United Technologies, and Steven Mollenkopf, Chief Executive Officer of Qualcomm, have agreed to be nominated for election to the board at this year’s meeting. With these changes, we have supplemented the nominated board’s safety, engineering, and aerospace expertise. At the same time, I want to extend my personal thanks to our two retiring directors, who have provided leadership and exemplary service to the board. Ed Liddy has reached the board’s mandatory retirement age, and Mike Zafirovski has decided not to stand for re-election after 15 years on our board. We are grateful for their many contributions over the years.

 

As you will read in the pages that follow, your board has been actively overseeing the company’s efforts toward restoring trust with stakeholders and recommitting to our core values. But we know that there is more work to do. You have my word that we will continue to evaluate additional actions in 2020 and beyond to strengthen our culture of transparency and accountability. This includes recommitting to Boeing’s values at every level of the company. Safety, quality and integrity are paramount in service to the company and the communities where Boeing’s people live and work.

 

The challenges of the past 18 months have reinforced that Boeing is more than a company. We are accountable across the globe for safely connecting people and places, serving men and women in uniform, enabling space exploration, and driving innovation throughout the aerospace industry. Our duty to all stakeholders is based on this trust.

 

Building that trust and delivering sustainable, long-term value requires regular dialogue with our shareholders. We completed extensive outreach in 2019, during which time members of the board and management engaged with shareholders representing approximately 45% of our outstanding stock. The input from these conversations informed the decision-making process and many of the recent actions we have taken, and it will continue to influence our path forward.

 

Finally, we hold our deep gratitude to Boeing’s more than 160,000 employees. Their ongoing contributions will continue to strengthen Boeing. Ultimately, it is Boeing’s people and the pride they take in their work that fills me with hope and confidence for the future.

 

LOGO

Lawrence W. Kellner

Chairman of the Board

The Boeing Company


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Message from Our CEO

 

To our shareholders:

 

LOGO   

As Boeing’s new president and CEO, I am now experiencing each day the values Boeing stands for. Our people are tirelessly devoted to the customers who purchase, fly on and use our products and services. They are devastated, as I am, by the loss of life in the 737 MAX accidents and feel the deepest sorrow for the loved ones of those who died. Together, we are determined to implement the lessons we continue to learn from that experience.

 

Those lessons are reshaping the way we do business and making us stronger as a company. We are engaging one another and our stakeholders with greater transparency and humility; asking and answering tough questions throughout the company; and focusing our efforts and our organizational structure more sharply on what matters most. Above all, we are holding ourselves accountable to the highest standards of safety, quality and integrity. The aviation industry and

Boeing have a rich history of learning from each and every tragedy we have faced.

 

This is a crucial time for Boeing. Foremost among our priorities is returning the 737 MAX safely to service and earning back trust with our stakeholders. We are committed to delivering excellence across our three businesses, restoring our production health, investing in our future and further strengthening our culture.

 

We will get these things done, and we will get them done right.

 

Throughout my first months, I have met with our people, our customers, our partners, our regulators and other stakeholders to ensure we understand their expectations. In these conversations I have seen deep support for our company and appreciation for the changes we are making to improve. Know also that we are committed to delivering on the high expectations you as shareholders have for us and that we set for ourselves.

 

Even through the 737 MAX crisis, our Boeing team continued to deliver quality programs and provide highly engineered products and services that improve the lives and enhance the security of people around the world.

 

And we have taken decisive steps to improve our ability to deliver safe products and services for our customers. For example, we have established a new Product and Services Safety organization that reviews all aspects of product safety. And we are strengthening our engineering teams by organizing them into a single function with a direct reporting line to Boeing’s chief engineer. We have also launched an enhanced reporting channel for employees to speak up about safety, quality and ethics concerns. I am determined to ensure that accountability begins with our leaders — and that starts with me.

 

I am proud to be part of the Boeing team, and I am confident in our future.

 

LOGO

David L. Calhoun

President and CEO

The Boeing Company


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Notice of 2020 Annual Meeting of Shareholders

To the Shareholders of The Boeing Company:

The Boeing Company’s 2020 Annual Meeting of Shareholders will be held on Monday, April 27, 2020, at 9:00 a.m., Central Time, at The Field Museum, 1400 South Lake Shore Drive, Chicago, Illinois. At the meeting, shareholders will be asked to:

 

 

elect directors;

 

 

approve, on an advisory basis, named executive officer compensation;

 

 

ratify the appointment of Deloitte & Touche LLP as our independent auditors; and

 

 

transact such other business, including certain shareholder proposals, as may properly come before the meeting and any postponement or adjournment thereof.

Shareholders of record at the close of business on February 27, 2020 are entitled to vote at the annual meeting and any postponement or adjournment thereof.

By Order of the Board of Directors,

 

LOGO

 

Grant M. Dixton
Vice President, Deputy General Counsel and Corporate Secretary

March 13, 2020

 

 

PLEASE REVIEW THE PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:

 

LOGO  

VIA THE INTERNET

Visit www.proxyvote.com

  LOGO  

BY MAIL

Sign, date, and return your proxy card or voting instruction form

   
LOGO  

BY TELEPHONE

Call the telephone number on your proxy card, voting instruction form or notice

  LOGO  

IN PERSON

You must register in advance in order to obtain an admission ticket and vote at the meeting. See page 77 for instructions on pre-registering

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on April 27, 2020: This Notice of Annual Meeting and Proxy Statement and the 2019 Annual Report are available at www.proxyvote.com.


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This proxy statement is issued in connection with the solicitation of proxies by the Board of Directors of The Boeing Company for use at the 2020 Annual Meeting of Shareholders and at any adjournment or postponement thereof. On or about March 13, 2020, we will begin distributing print or electronic materials regarding the annual meeting to each shareholder entitled to vote at the meeting. Shares represented by a properly executed proxy will be voted in accordance with instructions provided by the shareholder.

Table of Contents

 

THE BOEING BOARD: LEARNING AND TAKING ACTION

     1  

Listening to Your Feedback

     1  

Strengthening Safety

     2  

Holding Leaders Accountable

     3  

Making Senior Leadership Changes

     3  

Rebuilding Stakeholder Trust

     3  

Living Our Values

     4  

Our Path Forward

     5  

PROXY SUMMARY

     6  

Voting Recommendations of the Board

     6  

Director Nominees

     6  

Shareholder Outreach

     7  

Governance Checklist

     7  

Executive Compensation Checklist

     7  

Sustainability

     8  

ELECTION OF DIRECTORS (ITEM 1)

     9  

Board Composition

     9  

Director Qualification Criteria

     10  

Director Nominees

     11  

CORPORATE GOVERNANCE

     18  

Director Independence

     18  

Leadership Structure

     18  

Shareholder Outreach

     19  

Board Committees

     19  

Risk Oversight

     22  

Director Retirement Policy

     23  

Board Self-Evaluation

     23  

Meeting Attendance

     24  

Communication with the Board

     24  

Sustainability

     24  

Codes of Conduct

     26  

Compensation of Directors

     26  

Director Stock Ownership Requirements

     28  

Compensation Consultant

     29  

Related-Person Transactions

     29  

APPROVE, ON AN ADVISORY BASIS, NAMED EXECUTIVE OFFICER COMPENSATION (ITEM 2)

     31  

COMPENSATION DISCUSSION AND ANALYSIS

     33  

Executive Summary

     33  

Program Objectives

     36  

Program Design and Principal Elements

     37  

Other Design Elements

     44  

Governance of Pay-Setting Process

     45  

Additional Considerations

     47  

Compensation Committee Report

     49  

Compensation Committee Interlocks and Insider Participation

     49  

Compensation and Risk

     49  

COMPENSATION OF EXECUTIVE OFFICERS

     51  

Summary Compensation Table

     51  

2019 Grants of Plan-Based Awards

     53  

Outstanding Equity Awards at 2019 Fiscal Year-End

     55  

Option Exercises and Stock Vested

     56  

2019 Pension Benefits

     56  

2019 Nonqualified Deferred Compensation

     58  

Potential Payments upon Termination

     60  

Pay Ratio

     62  

RATIFY THE APPOINTMENT OF INDEPENDENT AUDITOR (ITEM 3)

     64  

Independent Auditor Fees

     64  

Audit Committee Report

     65  

STOCK OWNERSHIP INFORMATION

     66  

Directors and Executive Officers

     66  

Principal Shareholders

     67  

SHAREHOLDER PROPOSALS (ITEMS 4 THROUGH 9)

     68  

ANNUAL MEETING INFORMATION

     77  

Attending the Annual Meeting

     77  

Frequently Asked Questions

     77  

The 2021 Annual Meeting

     81  
 


Table of Contents

THE BOEING BOARD: LEARNING AND TAKING ACTION

 

The Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents continue to weigh heavily on everyone at Boeing. Our directors and senior leadership are learning from these accidents, listening to our internal and external stakeholders — including you, the shareholders — and taking action. We are committed to increased transparency as we work to return the 737 MAX to service and rebuild stakeholder trust one step at a time. For the latest updates on the MAX, visit http://www.boeing.com/737-max-updates/.

Listening to Your Feedback

 

The Board of Directors and management have talked to many shareholders since the 737 MAX accidents. Several directors, including our Chief Executive Officer while he served as independent Lead Director, our Non-Executive Chairman, and the Chairs of the Aerospace Safety Committee and Compensation Committee, have participated in certain of these engagements. All in all, we had substantive discussions with holders representing approximately 45% of Boeing stock in the last year, and all investor and other stakeholder feedback has been shared with, and discussed by, the full Board. For additional information, see “Shareholder Outreach” on page 19. Below are some of the key themes of these discussions. The pages that follow describe many of the actions the Board has taken to improve safety, strengthen our culture, and meet our commitments to our stakeholders.

 

   
Topic   Shareholder Feedback
   

 

 

Response to 737 MAX

Accidents

 

You asked for more information regarding the Board’s role in responding to the 737 MAX tragedies, including the actions it has taken and will take to prevent future accidents. Many of you also expressed concern over the level of Board oversight in the wake of the 737 MAX accidents.

 

   

Risk Oversight

 

You sought to understand the Board’s role in risk oversight and the Company’s reporting lines for potential safety issues, expressing particular interest in the recent creation of the Product and Services Safety organization and the decision to realign the engineering function around a single Chief Engineer role with a direct reporting relationship to the CEO.

 

   

Board Leadership

 

 

 

You supported the Board’s decision to separate the CEO and Chairman roles and sought more information on the timing and process behind that decision.

 

   

Board Composition

 

You expressed continued interest in understanding key emerging skill areas for Board members. Many of you focused in particular on the need to ensure that the Board has the skills and experience needed to exercise adequate oversight of the Company’s commitment to safety and its engineering function.

 

   

Company Culture

 

You expressed concerns regarding media reports on whistleblower complaints and internal messages, seeking to understand whether these incidents reflect the broader company culture and how Boeing internally promotes its values, including safety, quality and integrity.

 

   

 

Executive Compensation

 

 

 

 

You inquired about the structure and elements of our executive compensation program, particularly with respect to how the program incentivizes safety. Several of you asked the Board to consider potential safety-related performance metrics. Many of you also made clear that the Board should review potential actions to sharpen executive accountability for safety-related matters.

 

 

LOGO  

 

      2020 Proxy Statement

 

 

 

 

      1

 

 


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THE BOEING BOARD: LEARNING AND TAKING ACTION

 

Strengthening Safety

 

Promptly after the grounding of the 737 MAX, the Board established a temporary Committee on Airplane Policies and Processes. This committee of independent directors, chaired by Admiral Edmund P. Giambastiani Jr., conducted a comprehensive, five-month review of Boeing’s policies and processes for airplane design and development. This committee’s activities included in-depth consultation with Boeing engineers as well as outside experts from aerospace and other industries where safety is of paramount importance. After that review, the Board took or drove management to take the following actions:

 

 

Actions taken to strengthen the culture of safety throughout Boeing and the broader aerospace industry

 

     

 

1

  Established a permanent Aerospace Safety Committee    Established in August 2019, this Board committee oversees and ensures the safe design, development, manufacture, production, operation, maintenance and delivery of our products and services.
     

 

2

  Strengthened the Engineering function    To further strengthen engineering and elevate product and services safety, engineers across Boeing now report to the Chief Engineer.
     

 

3

  Created a product and services safety organization   

 

Reporting directly to the Company’s Chief Engineer and the Aerospace Safety Committee, this organization reviews all aspects of product safety.

     

 

4

  Establishing a Design Requirements Program    This program incorporates historical design materials, data and information, best practices, lessons learned and detailed after-action reports to reinforce our commitment to continuous improvement.
     

 

5

  Enhancing the Continued Operation Safety Program    To increase transparency and ensure visibility of safety-related issues, the Continued Operation Safety Program requires the Chief Engineer’s review of all reports on safety and potential safety issues.
     

 

6

  Reexamining flight deck design and operation    To anticipate the needs of future pilot populations, we are reexamining assumptions around flight deck design and operation in partnership with our airline customers and industry members.
     

 

7

 

 

Expanding the Safety Promotion Center

   The Safety Promotion Center, established in 2017, is a place for employees to learn and reflect on our safety culture and renew personal commitments to safety. We are extending its role and reach to our global network.
     

 

8

 

 

Strengthening safety systems

   New safety leadership roles, empowered safety review boards and an expanded anonymous safety reporting system are strengthening safety management systems at Boeing and throughout our supply chain.
     

 

9

 

 

Leading in new capabilities

   Additional investments are being made in enhanced flight simulation and computing as well as advanced research and development for future flight decks. Broader plans are underway for improving the global aviation safety ecosystem.
     

 

10

 

 

Investing in talent

   To address the global need for aerospace talent, we are sharpening our focus on pilot and maintenance technician training and STEM education.

 

 

2

         LOGO  

 

      2020 Proxy Statement


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THE BOEING BOARD: LEARNING AND TAKING ACTION

 

Holding Leaders Accountable

 

Since the grounding of the 737 MAX, the Board announced the following regarding executive accountability:

 

 

Former President and CEO Dennis Muilenburg was not paid any severance or other benefits in connection with his retirement,

 

 

No annual incentive payouts for 2019 performance, and

 

 

No long-term incentive performance award payouts for 2017-2019 performance.

In addition, in 2020 the Board enhanced Boeing’s clawback policy to cover instances of misconduct that compromise the safety of our products or services. The Compensation Committee also strengthened its process for assessing the performance of executives with respect to safety and our other core values, including by ensuring formal consultations with the Aerospace Safety Committee in connection with individual performance reviews.

For additional information on executive compensation, including detail on Mr. Muilenburg’s 2019 compensation, see “Compensation Discussion and Analysis” beginning on page 33 and “Compensation of Executive Officers” beginning on page 51.

Making Senior Leadership Changes

 

During the course of the last year, the Board has implemented several changes to Boeing’s leadership. These changes are designed to help rebuild the trust of our stakeholders, commit to a culture of greater transparency, and strengthen our company around our core values, including safety, quality and integrity. In addition, the Board has sharpened its focus on board refreshment in order to ensure that our Board consists of a diverse, highly-skilled group of leaders focused on sustainable, long-term business success. Affirmative leadership-related actions taken by the Board to date include the following (in order of occurrence):

 

 

Amended our Corporate Governance Principles to explicitly identify safety-related experience as a criterion when considering potential director nominees

 

 

Separated the roles of CEO and Chairman

 

 

Elected Stanley Deal to serve as President and CEO, Boeing Commercial Airplanes

 

 

Elected Admiral John Richardson, the 31st Chief of Naval Operations for the U.S. Navy, to our Board

 

 

Elected Larry Kellner to serve as Chairman of the Board

 

 

Elected Dave Calhoun to serve as the Company’s President and CEO

 

 

Nominated Akhil Johri, former Chief Financial Officer of United Technologies, and Steven Mollenkopf, Chief Executive Officer of Qualcomm, for election to the Board at this year’s Annual Meeting of Shareholders

For more information on the nominees for election to the Board and our continued efforts to maintain a skilled and diverse Board, see “Election of Directors” beginning on page 9.

Rebuilding Stakeholder Trust

 

 

We understand that re-establishing trust and increasing transparency with all stakeholders, not just our shareholders, is the only path forward; we will continue to listen, seek feedback, and respond — appropriately, urgently and respectfully.

 

   

Stakeholders

 

  

Company Actions

 

   
Families and Communities   

•   Recommitment to transparency with all stakeholders

 

•   Extensive personal outreach by senior management to the families of those impacted by the 737 MAX accidents

 

•   Pledged $100 million to the families and communities affected by the accidents

   
Regulators   

•   Working closely with the FAA and other global regulators to safely return the 737 MAX to service

 

•   Recommitting to transparency and accounting for rigorous scrutiny by regulatory authorities

 

LOGO  

 

      2020 Proxy Statement

 

 

 

 

      3

 

 


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THE BOEING BOARD: LEARNING AND TAKING ACTION

 

   
Stakeholders    Company Actions
   
Customers   

•   Extensive customer engagement regarding impact of the 737 MAX grounding on their operations

 

•   Recognized liabilities of $8.3 billion in 2019, net of insurance, related to customer concessions and other considerations

 

•   Continual learning and focus on safety, first-time quality, and delivering on commitments

   
Pilots   

•   Met with hundreds of airline pilots to discuss 737 MAX software updates

 

•   Recommended robust simulator training for all 737 MAX pilots

 

•   Conducted hundreds of simulator sessions with pilots

   
Suppliers   

•   Closely engaging with more than 600 737 suppliers to ensure supply chain stability

 

•   Working with supply chain to minimize disruption related to the continued grounding

Living Our Values

 

The Boeing family includes more than 160,000 employees, an extensive network of customers and suppliers as well as community stakeholders across the globe. We continue to humbly reflect on learnings from the past year to strengthen our actions aligned with our values. We believe that cultivating an open, inclusive and accountable culture is a journey that we must always advance. Through our focus on values, including safety, quality and integrity, we will meet our commitments and stakeholders’ expectations.

 

 

We have recommitted ourselves to Boeing’s core values, which define who we are and guide us on our journey of continuous improvement.

 

   

Safety

 

 

We value human life and well-being above all else.

 

   

Quality

 

 

We strive for first-time quality and continuous improvement.

 

   

Integrity

 

 

We hold ourselves to the highest ethical standards.

 

   

Diversity and Inclusion

 

 

We value the skills, strengths and perspectives of our diverse team.

 

   

Trust and Respect

 

 

We act with honesty and treat everyone fairly.

 

   

Corporate Citizenship

 

 

We are a responsible partner to our communities.

 

   

Stakeholder Success

 

 

We strive to deliver excellence to all we serve.

 

 

 

4

         LOGO  

 

      2020 Proxy Statement


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THE BOEING BOARD: LEARNING AND TAKING ACTION

 

Our Path Forward

 

 

LOGO

 

President and CEO Dave Calhoun has asked Boeing employees to focus on the following priorities:

 

 

Safely return the 737 MAX to service, following the lead of regulators and working with them to ensure they are completely satisfied with the airplane and our work, so we can continue to meet our customer commitments.

 

 

Rebuild trust among stakeholders by recommitting to transparency, listening and responding to feedback, and meeting and exceeding expectations.

 

 

Focus on our values while further strengthening our culture, fostering an inclusive environment that embraces oversight and accountability.

 

 

Operate with excellence to deliver safe products and services to customers, continuously improving quality performance and remaining focused on what is important.

 

 

Restore production health by taking steps to preserve the supply chain and workforce expertise, ensuring we are ready to restart 737 MAX production and increase rate safely, smartly and with the highest standards of quality.

 

 

Invest in our future and keep innovating to succeed, building our global workforce and developing new processes and technologies to improve safety and efficiency.

 

LOGO  

 

      2020 Proxy Statement

 

 

 

 

      5

 

 


Table of Contents

PROXY SUMMARY

Voting Recommendations of the Board

 

 

Item      Description    For    Against    Page  

 

1

 

  

 

Election of directors

 

  

 

LOGO

 

     

 

 

 

 

9

 

 

 

 

 

2

 

  

 

Approve, on an advisory basis, named executive officer compensation

 

  

 

LOGO

     

 

 

 

 

31

 

 

 

 

3

 

  

 

Ratify the appointment of independent auditor

 

  

 

LOGO

 

     

 

 

 

 

64

 

 

 

 

4

 

  

 

Shareholder proposal – disclosure of director skills, ideological perspectives, and experience and minimum director qualifications

 

     

 

LOGO

 

  

 

 

 

 

 

 

68

 

 

 

 

 

5

 

  

 

Shareholder proposal – additional report on lobbying activities

 

     

 

LOGO

 

  

 

 

 

 

70

 

 

 

 

6

 

  

 

Shareholder proposal – policy requiring independent Board Chairman

 

     

 

LOGO

 

  

 

 

 

 

71

 

 

 

 

7

 

  

 

Shareholder proposal – written consent

 

     

 

LOGO

 

  

 

 

 

 

73

 

 

 

 

8

 

  

 

Shareholder proposal – mandatory retention of significant stock by executives

 

     

 

LOGO

 

  

 

 

 

 

74

 

 

 

 

9

 

  

 

Shareholder proposal – additional disclosure of compensation adjustments

 

 

       

 

LOGO

 

  

 

 

 

 

75

 

 

 

 

Director Nominees

 

Three of our independent directors joined the Board in the last three years, and two additional director nominees—Akhil Johri and Steve Mollenkopf—are up for election this year for the first time. These new additions reflect our ongoing Board refreshment strategy and our commitment to further strengthening and diversifying the skills and experiences of the Board. Each director nominee is listed below, and you can find additional information under “Election of Directors (Item 1)” beginning on page 9.

 

 Name    Age     

Director

Since

     Professional Background    Board Committees

 

 Robert A. Bradway

 

  

 

 

 

 

57

 

 

 

 

  

 

 

 

 

2016

 

 

 

 

  

 

Chairman & CEO, Amgen

 

  

 

Audit, Finance

 

 

 David L. Calhoun

 

  

 

 

 

 

62

 

 

 

 

  

 

 

 

 

2009

 

 

 

 

  

 

President & CEO, The Boeing Company

 

  

 

 

 

 Arthur D. Collins Jr.

 

  

 

 

 

 

72

 

 

 

 

  

 

 

 

 

2007

 

 

 

 

  

 

Former Chairman & CEO, Medtronic

 

  

 

Compensation, GON

 

 

 Edmund P. Giambastiani Jr.

 

  

 

 

 

 

71

 

 

 

 

  

 

 

 

 

2009

 

 

 

 

  

 

Seventh Vice Chairman of the U.S. Joint

Chiefs of Staff; Former NATO Supreme Allied Commander Transformation and Former

Commander, U.S. Joint Forces Command

 

  

 

Aerospace Safety, Audit,

Special Programs

 

 

 Lynn J. Good

 

  

 

 

 

 

60

 

 

 

 

  

 

 

 

 

2015

 

 

 

 

  

 

Chairman, President & CEO, Duke Energy

 

  

 

Aerospace Safety, Audit

 

 

 Nikki R. Haley

 

  

 

 

 

 

48

 

 

 

 

  

 

 

 

 

2019

 

 

 

 

  

 

Former U.S. Permanent Representative to the United Nations

 

  

 

Audit, Finance

 

 

 Akhil Johri

 

  

 

 

 

 

58

 

 

 

 

    

 

 

 

 

  

 

Former CFO, United Technologies

 

  

 

 

 

 Lawrence W. Kellner*

 

  

 

 

 

 

61

 

 

 

 

  

 

 

 

 

2011

 

 

 

 

  

 

Former Chairman & CEO, Continental Airlines

 

  

 

Aerospace Safety, Audit

 

 

 Caroline B. Kennedy

 

  

 

 

 

 

62

 

 

 

 

  

 

 

 

2017

 

 

  

 

Former U.S. Ambassador to Japan

 

  

 

Audit, Finance

 

 

 Steven M. Mollenkopf

 

  

 

 

 

 

51

 

 

 

 

    

 

 

 

 

  

 

CEO, Qualcomm

 

  

 

 

 

 John M. Richardson

 

  

 

 

 

 

59

 

 

 

 

  

 

 

 

 

2019

 

 

 

 

  

 

31st Chief of Naval Operations, U.S. Navy; Former Director of the Naval Nuclear Propulsion Program, U.S. Navy

 

  

 

Aerospace Safety, Special Programs

 

 

 Susan C. Schwab

 

  

 

 

 

 

64

 

 

 

 

  

 

 

 

 

2010

 

 

 

 

  

 

Former U.S. Trade Representative

 

  

 

Compensation, GON

 

 

 Ronald A. Williams

 

  

 

 

 

 

70

 

 

 

 

  

 

 

 

 

2010

 

 

 

 

  

 

Former Chairman & CEO, Aetna

 

  

 

Audit, Finance, Special Programs

 

 

*

Non-Executive Chairman

 

 

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Table of Contents

PROXY SUMMARY

 

Shareholder Outreach

 

We meet with shareholders throughout the year to ensure that the Board and management are focused on, and responsive to, investor priorities and concerns. For additional information, see “Shareholder Outreach” on page 19.

Governance Checklist

 

 

Five independent director nominees with tenure of less than three years (page 10)

 

Balanced and diverse group of Board nominees (page 9)

 

Independent Chairman of the Board (page 18)

 

Robust succession planning process for senior leadership positions, including in-depth meetings between individual directors and senior executives

 

Extensive Board oversight of key strategic, operational, and compliance risks, with a sharpened focus on risks that could impact the safety and quality of our products and services (page 22)

 

Significant involvement in strategy development

 

Active engagement by directors and management with shareholders throughout the year (page 19)

 

Comprehensive annual self-assessments of Board and its committees (page 23)

 

12 of 13 director nominees are independent (page 10)

 

Executive sessions of independent directors conducted after every regularly scheduled Board meeting

 

Approximately 98% average attendance at Board and committee meetings during 2019 (page 24)

 

Robust Board refreshment process that takes into account diversity and expertise, as well as the evolving needs and circumstances of the Company

 

Multiple visits to Boeing production sites by each director every year

 

Proxy access right for shareholders seeking to nominate directors (page 81)

 

Limits on director service on outside boards (page 10)

 

Publicly disclosed policies and practices regarding political advocacy, including enhanced disclosure of key trade association relationships beginning in 2020 (see https://www.boeing.com/company/key-orgs/government-operations/#/political)

 

Board oversight of political and charitable contributions

 

Directors required to hold equity until they leave the Board

 

Majority voting for all directors, each of whom is elected for a one-year term and is subject to a resignation policy in the event he or she fails to receive a majority vote

 

No supermajority voting requirements

 

Shareholder right to call special meetings

 

No poison pill and any future poison pill must be submitted to shareholders

Executive Compensation Checklist

 

 

No annual incentive payouts for 2019 performance

 

No long-term incentive performance award payouts for 2017-2019 performance

 

Former CEO provided with no severance or separation payments (page 35)

 

Enhanced clawback policy designed to address instances of misconduct that compromise the safety of our products or services

 

Enhanced focus on safety when evaluating individual executive performance, including formal consultation between Aerospace Safety and Compensation committees

 

Incentive pay programs that feature multiple Company performance metrics and account for individual performance with the majority of target incentive compensation tied to long-term performance (page 38)

 

Approximately 86% of target NEO pay in 2019 was variable and at risk (page 33)

 

No accelerated vesting of equity awards in connection with a change in control

 

No pledging or hedging of Boeing stock by officers or directors (page 48)

 

Rigorous stock holding and ownership requirements for executive officers (page 47)

 

No change-in-control agreements

 

No employment agreements (except where required by non-U.S. local law)

 

LOGO  

 

      2020 Proxy Statement

 

 

 

 

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Table of Contents

PROXY SUMMARY

 

LOGO

Sustainability

 

Boeing’s commitment to innovation extends to how we care for our environment, engage with the communities in which we operate, and build and sustain a corporate culture that promotes accountability and aligns with our values. See “Sustainability” on page 24 for additional information.

 

     

ENVIRONMENTAL

 

   

SOCIAL

 

   

GOVERNANCE

 

     
Global environmental leadership through aerospace innovation — companywide focus on emitting less carbon, using less energy and water, and creating less waste while protecting human and environmental health in communities across the globe.     Create positive changes in our workplace and local communities for our employees, customers and partners, focused on the way we operate our business.     Managing our company in a manner that upholds our values, addresses key risks, and takes into account the long-term interests of our employees, shareholders, customers, suppliers, and communities

                                                                                                                                                                                            

   

                                                                                                                                                                                             

   

                                                                                                                                                                                                     

     

48 BILLION POUNDS

of fuel saved by the 787 Dreamliner family since it entered service, compared to the airplane it replaces

   

$240

MILLION

invested in our communities

   

SAFETY

Established

Board Aerospace Safety

Committee and

Product and Services

Safety organization

 

 

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Table of Contents

ELECTION OF DIRECTORS (ITEM 1)

 

 

PROPOSAL SUMMARY

Shareholders are being asked to elect the 13 director nominees under “Director Nominees” beginning on page 11 to serve until the 2021 Annual Meeting of Shareholders.

 

LOGO   The Board recommends that you vote FOR each of the 13 director nominees.

 

Board Composition

 

 

Background

 

  

Number of
Nominees

 

  

Alignment with Company Strategy

 

     

In-Depth

Aerospace

Expertise

   4    Substantial knowledge of aerospace enables enhanced oversight of product development
     

Engineering/ Technology Leadership

   8   

Experience in precision engineering or in leading teams working on cutting-edge technologies enables directors to effectively oversee the design, development, and testing of complex aerospace products, services, and systems

 

     

Complex Manufacturing Expertise

   5    Understanding of multifaceted industrial processes allows directors to critically evaluate manufacturing
     

Safety

   7   

Expertise in establishing and overseeing safety processes and procedures provides the Board with the proper perspectives to effectively monitor Boeing’s operations

 

     

Highly-Regulated Industry Experience

   7   

Familiarity with highly-regulated industries allows directors to advise on how to most effectively work with regulators, meet their expectations, and achieve mutual goals

 

     

Current or Former CEO of a Global Public Company

   7   

Understanding of and experience navigating key challenges of the chief executive role at large, multi-national companies allows directors to effectively advise and oversee the performance of our CEO

 

     

Fortune 500 Board

Experience

   10   

Work on other large, public company boards provides directors with similar oversight experience

 

     

International Leadership

   7   

Experience leading large, global teams and significant experience managing global relationships and/or international stakeholders enables directors to advise management on key risks involving our global customer and supply bases, oversee the Company’s processes for managing global compliance systems, and identify strategic opportunities for future international growth

 

     

Senior Leadership Experience

   13   

Awareness of intricacies of effectively running teams enables directors to advise and assess the performance of our management team

 

     

Senior U.S. Government /

Military Experience

   5   

Experience in large-scale operations, strategy development, international relations, defense contracting, and/or risk oversight in sectors where safety is a key priority enables directors to critically examine and shape policies and procedures, as well as advise on strategic considerations involving our global defense and commercial operations

 

     

Former Fortune 500 CFO

   4   

Expertise in large-scale financial decision making helps guide capital allocation and other financial decisions

 

 

LOGO  

 

      2020 Proxy Statement

 

 

 

 

      9

 

 


Table of Contents

ELECTION OF DIRECTORS (ITEM 1)

 

  LOGO           LOGO
        
 

 

12 of 13 Independent

 

 

 

 

Data reflect 2020 nominees.

Director Qualification Criteria

 

The Governance, Organization and Nominating Committee, or the GON Committee, is responsible for identifying and assessing potential candidates and recommending nominees for the Board’s approval. The GON Committee assesses the qualifications of incumbent directors and other candidates for nomination on an ongoing basis, including with respect to the following key factors:

 

 

Experience. The GON Committee considers each candidate’s experience and leadership record in such areas as operations, international business, engineering, manufacturing, safety, risk management, finance, government, marketing, international affairs, technology, and public policy.

 

 

Industry Expertise. The GON Committee ensures that a number of directors possess aerospace and/or defense industry, as well as technology, expertise. This broad industry expertise allows the Board to assess Company performance and provide strategic guidance with respect to each of our principal businesses.

 

 

Diversity. The Board is deeply committed to seeking broad diversity of background, experience, skills, and perspectives among its members.

 

 

Safety. The Board is committed to safety as a core value of the Company—both with respect to the safety of our aerospace products and services and the safety of our employees in the workplace. One manifestation of this commitment is ensuring that the Board includes members with a wide range of experience in industries and professions where safety is paramount.

 

 

Outside Board Memberships. Directors are expected to ensure that other commitments, including outside board memberships, do not interfere with their duties and responsibilities as Boeing directors. Consequently, directors may not serve on more than four public company boards in addition to Boeing (two if a public company CEO). In addition, the GON Committee reviews directors’ outside commitments even when they do not exceed these limits, to ensure that all directors are able to devote sufficient time to Boeing.

 

 

Independence. In addition to any regulatory limitations with respect to independence, the GON Committee also considers other positions the director holds or has held, and evaluates each nominee with respect to Boeing’s publicly-disclosed Director Independence Standards, the NYSE director independence standards, and any potential conflicts of interest.

 

 

Professional Reputation. As set forth in our Corporate Governance Principles, our directors are expected to have a reputation for personal and professional integrity, honesty, and adherence to the highest ethical standards.

 

 

Length of Service. The Board believes that regular refreshment of the Board is critical for us to gain fresh perspectives and maintain our position as a global aerospace leader. At the same time, with decades-long product cycles and lengthy development periods, we also benefit from directors with extensive Boeing experience. As a result, the GON Committee’s strategy is to maintain a balance among directors of short, medium and longer tenures.

 

 

 

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Table of Contents

ELECTION OF DIRECTORS (ITEM 1)

 

 

Regulatory Compliance. All director nominees must satisfy regulatory requirements for Board service, including those with respect to any committee on which such director would be asked to serve.

 

 

Prior Contributions to the Board. When evaluating the candidacy of an incumbent director, the Board also considers the director’s ongoing contributions to the Board, including attendance and participation at meetings and ongoing relevance of their skills and experience, as well as the results of both formal and informal assessments provided by fellow directors.

Moving forward, the GON Committee will continue to seek out highly qualified director candidates as part of the Board succession plan. By identifying and electing directors with safety-related experience, expertise in areas like risk management, software development, engineering, leadership, and finance, and diverse backgrounds and perspectives, the Board seeks to continue to effectively fulfill its oversight responsibilities and uphold Boeing’s core values, all while enabling Boeing to achieve its evolving strategic imperatives.

Director Nominees

 

Set forth below are the ages, principal occupations, directorships within the past five years, and other details about each nominee. Admiral Richardson, who joined the Board in 2019, was referred to the GON Committee by another independent director. Messrs. Johri and Mollenkopf, who are new nominees to the Board, were referred to the GON Committee by independent search firms.

 

 

ROBERT A. BRADWAY

 

LOGO

 

Chairman & CEO,

Amgen Inc.

 

Boeing director since: 2016

 

Professional highlights:

 

•   Chairman & CEO, Amgen Inc. (Chairman 2013-present; CEO 2012-present)

 

•   President & COO, Amgen Inc. (2010-2012)

 

•   Executive VP & CFO, Amgen Inc. (2007-2010)

  

Independent: Yes

 

Age: 57

 

Other current directorships:

 

•   Amgen Inc.

 

Prior directorships:

 

•   Norfolk Southern Corporation

 

 

Mr. Bradway brings to the Board critical skills in the areas of high technology, product development, financial oversight, product safety, and risk management. His experience as a senior executive in the biotechnology industry, including as Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer of Amgen, provides him with an extensive understanding of the strategic considerations and challenges associated with meeting the requirements of numerous safety and regulatory compliance regimes around the world. In addition, he previously served as a director of Norfolk Southern Corporation, one of the nation’s largest railroad transportation companies, where virtually every aspect of operations is heavily regulated and subject to strict safety-related oversight. In recognition of Mr. Bradway’s experience in corporate finance, risk management, and executive leadership, the Board elected him to serve on the Audit and Finance Committees.

 

LOGO  

 

      2020 Proxy Statement

 

 

 

 

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Table of Contents

ELECTION OF DIRECTORS (ITEM 1)

 

 

DAVID L. CALHOUN

 

LOGO

 

President & CEO,

The Boeing Company

 

Boeing director since: 2009

 

Professional highlights:

 

•   President & CEO, The Boeing Company (2020-present)

 

•   Senior Managing Director & Head of Private Equity Portfolio Operations, The Blackstone Group (2014-2020)

 

•   Chairman & CEO, Nielsen Holdings plc. (Chairman 2014-2016; CEO 2010-2014)

 

•   Chairman & CEO, The Nielsen Company B.V. (2006-2014)

 

•   Vice Chairman, General Electric Company, & President and CEO, GE Infrastructure (2005-2006)

  

Independent: No

 

Age: 62

 

Other current directorships:

 

•   Caterpillar Inc.

 

Prior directorships:

 

•   Gates Industrial Corporation plc

 

•   Nielsen Holdings plc.

 

 

Mr. Calhoun brings a diverse skill set to the Board, including deep and long-standing aviation industry experience as Boeing’s President and Chief Executive Officer, former Boeing Chairman and independent Lead Director, and leadership of GE’s aircraft engines and transportation businesses. He also brings experience leading businesses through periods of change, having led Nielsen’s transformation into a leading global information and measurement company. In addition, Mr. Calhoun brings to Boeing strong leadership and valuable insight and perspective on a wide array of strategic and business matters, stemming from his vast executive, management, and operational experience at Blackstone, as well as at Nielsen and GE. Mr. Calhoun’s significant global aerospace, aircraft, manufacturing, and high-technology industry expertise, as well as leadership experience on the boards of Caterpillar and Gates Industrial Corporation, positions him well to serve on the Board and lead Boeing as President and Chief Executive Officer.

 

 

ARTHUR D. COLLINS JR.

 

LOGO

 

Former Chairman & CEO, Medtronic, Inc.

 

Boeing director since: 2007

 

Professional highlights:

 

•   Senior Advisor, Oak Hill Capital Partners (2009-2019)

 

•   Chairman & CEO, Medtronic, Inc. (Chairman 2002-2008; CEO 2002-2007)

 

•   President & CEO, Medtronic, Inc. (2001-2002)

 

•   President & COO, Medtronic, Inc. (1996-2001)

  

Independent: Yes

 

Age: 72

 

Other current directorships:

 

•   U.S. Bancorp

 

Prior directorships:

 

•   Alcoa Inc.

 

•   Arconic, Inc.

 

 

Mr. Collins provides key leadership on a wide variety of corporate and strategic matters based on his extensive senior executive and business leadership experience, with a particular focus on highly regulated industries. The Board benefits from Mr. Collins’ years of executive leadership at Medtronic, a global leader in medical technology, services, and solutions that operates in over 120 countries in an industry where product safety and quality are of utmost importance. Mr. Collins also brings to the Board his vast experience gained from serving on other corporate boards. Mr. Collins has chaired multiple compensation, governance, and finance committees, including his current service as chair of the governance committee of U.S. Bancorp. As a result of his extensive executive management and corporate governance expertise, the Board elected Mr. Collins to serve as Chair of the Compensation Committee.

 

 

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Table of Contents

ELECTION OF DIRECTORS (ITEM 1)

 

 

EDMUND P. GIAMBASTIANI JR.

 

LOGO

 

Seventh Vice Chairman, U.S. Joint Chiefs of Staff;
Former Supreme
Allied Commander Transformation,
NATO

 

Boeing director since: 2009

 

Professional highlights:

 

•   President, The Giambastiani Group LLC (2009-present)

 

•   Seventh Vice Chairman, U.S. Joint Chiefs of Staff (2005-2007)

 

•   Supreme Allied Commander Transformation, NATO (2003-2005)

 

•   Commander, U.S. Joint Forces Command (2002-2005)

 

•   Admiral, U.S. Navy (retired); career nuclear trained submarine officer with commands at the submarine, squadron and fleet levels

  

Independent: Yes

 

Age: 71

 

Other current directorships/ trusteeships:

 

•   THL Credit, Inc.

 

•   Board of Trustees of the Invesco U.S. ETF Complex (6 trusts comprising 211 funds)

 

Prior directorships:

 

•   Monster Worldwide, Inc.

 

 

Admiral Giambastiani brings a wide breadth of experience with major program development, program resourcing, and other aspects of managing large U.S. armed forces acquisition programs, with a particular focus on high-technology programs. During his distinguished U.S. military career of over 40 years, Admiral Giambastiani developed extensive strategic, leadership, risk management, operational, and engineering experience that complements Boeing’s diverse business needs. These skills enable him to provide expert advice to senior management and his fellow directors on a range of technical and operational matters. Since his retirement from the Navy, Admiral Giambastiani has expanded his oversight experience, serving on numerous U.S. Government advisory boards, accident/incident investigation teams and task forces. Admiral Giambastiani significantly enhances the Board’s strategic and management oversight abilities, particularly with respect to product quality and safety. As a result of his experience as a senior military leader in strategy development and program risk oversight, as well as his expertise with respect to safety and cybersecurity, the Board elected Mr. Giambastiani to serve as Chair of the specially-appointed Committee on Airplane Policies and Processes, and later the Chair of the standing Aerospace Safety Committee. Admiral Giambastiani earned a bachelor of science degree with a minor in electrical engineering with leadership distinction from the U.S. Naval Academy.

 

 

LYNN J. GOOD

 

LOGO

 

Chairman, President & CEO, Duke Energy Corporation

 

Boeing director since: 2015

 

Professional highlights:

 

•   Chairman, President & CEO, Duke Energy Corporation (Chairman 2016-present; President and CEO 2013-present)

 

•   Vice Chairman, Duke Energy Corporation, (2013-2016)

 

•   Executive Vice President & CFO, Duke Energy Corporation (2009-2013)

  

Independent: Yes

 

Age: 60

 

Other current directorships:

 

•   Duke Energy Corporation

 

Prior directorships:

 

•   Hubbell Incorporated

 

 

Ms. Good brings to the Board substantial experience in executive leadership, safety, corporate governance, financial management, and accounting, as well as operational expertise in a highly-regulated, capital-intensive industry. Ms. Good’s record as Chief Executive Officer and Chairman of Duke Energy, one of the nation’s largest grid and generation operators, enables her to advise management on a wide range of strategic, financial, and governance matters, including the challenges associated with safety performance, large-scale capital projects, transformative technologies and crisis management. Ms. Good also has vast financial management experience, gained principally from her prior service as Chief Financial Officer and Treasurer of Duke Energy and as chair of Hubbell’s Audit Committee. Ms. Good also has extensive capital markets proficiency, significant merger and restructuring experience, and accounting and auditing skills earned from nearly 30 years as a Certified Public Accountant and 11 years as an audit partner at Arthur Andersen LLP and Deloitte & Touche LLP. As a result of Ms. Good’s extensive auditing experience and skills in corporate finance and strategic matters, the Board elected her to serve as Chair of the Audit Committee. Ms. Good also serves as chair of the Institute of Nuclear Power Operations, a not-for-profit organization responsible for promoting the highest levels of safety and reliability in nuclear plant operations. As a result of this experience as well as her record at a Fortune 125 company recognized as a leader in safety and operational performance, the Board has appointed her to serve on the Aerospace Safety Committee. Ms. Good earned bachelor of science degrees in systems analysis and accounting from Miami University.

 

LOGO  

 

      2020 Proxy Statement

 

 

 

 

      13

 

 


Table of Contents

ELECTION OF DIRECTORS (ITEM 1)

 

 

NIKKI R. HALEY

 

LOGO

 

Former U.S. Permanent Representative to the United Nations

 

Boeing director since: 2019

 

Professional highlights:

 

•   U.S. Permanent Representative to the United Nations (2017-2019)

 

•   Governor, South Carolina (2011-2017)

 

•   Member, South Carolina House of Representatives (2005-2011)

  

Independent: Yes

 

Age: 48

 

 

Ambassador Haley brings to the Board extensive experience in government and international affairs. During Ambassador Haley’s distinguished career as a legislator, Governor, and ambassador, she demonstrated strong leadership abilities, significant achievements in both domestic and foreign policy, and a commitment to a vibrant and sustainable U.S. industrial base. During her tenure as U.S. Permanent Representative to the United Nations, Ambassador Haley served as a member of the President’s cabinet and as a member of his National Security Council. In this capacity, she led an international U.S. Presidential delegation, represented the President in meetings with world leaders across multiple continents and convened the first council session dedicated to human rights. Ambassador Haley has a record of accomplishment in areas that are critical to Boeing’s long-term success, such as industrial policy, education, human rights, and international relations, which strengthen the Board’s oversight of Boeing’s long-term business strategy as well as its relationships with its global customer base and other key partners. She earned a bachelor of science degree in accounting from Clemson University.

 

 

AKHIL JOHRI

 

LOGO

 

Former Executive Vice President and CFO, United Technologies Corporation

 

Boeing director since: N/A

 

Professional highlights:

 

•   Special Advisor to the Chairman and Chief Executive Officer, United Technologies Corporation (2019-2020)*

 

•   Executive Vice President and Chief Financial Officer, United Technologies Corporation (2015-2019)

 

•   Chief Financial Officer, Pall Corporation (2013-2014)

 

•   Vice President, Finance and Chief Financial Officer, UTC Propulsion & Aerospace Systems, United Technologies Corporation (2011-2013)

 

•   Vice President, Financial Planning and Investor Relations, United Technologies Corporation (2009-2011)

  

Independent: Yes

 

Age: 58

 

Other current directorships:

 

•   Cardinal Health Inc.

 

 

Mr. Johri brings to the board extensive aerospace industry expertise from his more than 30 years at United Technologies, as well as critical skills developed while serving as Chief Financial Officer at multiple Fortune 500 companies. These skills will enable Mr. Johri to provide critical insights to the Board in areas as diverse as financial strategy, strategic operations, the dynamics of managing a complex, global supply chain, articulating corporate strategy to investors and other stakeholders, and mitigating risks associated with the development of new products and services at a large industrial manufacturer. Mr. Johri also brings to the Board unique insights relating to his senior leadership experience at a major supplier to aerospace companies like Boeing. In addition, in his capacity as an independent director and audit committee member at Cardinal Health, Mr. Johri will bring to the Board experience in risk oversight and corporate governance of a large company in a highly regulated industry. Mr. Johri is a graduate of the Indian Institute of Management, Ahmedabad, and is a Chartered Accountant.

 

*  Mr. Johri is retiring from United Technologies on March 31, 2020.

 

 

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Table of Contents

ELECTION OF DIRECTORS (ITEM 1)

 

 

LAWRENCE W. KELLNER

 

LOGO

 

Former Chairman & CEO, Continental Airlines, Inc.

 

Boeing director since: 2011; Non-Executive Chairman (2019-present)

 

Professional highlights:

 

•   President, Emerald Creek Group, LLC (2010-present)

 

•   Chairman & CEO, Continental Airlines, Inc. (2004-2009)

 

•   President & COO, Continental Airlines, Inc. (2003-2004)

  

Independent: Yes

 

Age: 61

 

Other current directorships:

 

•   Marriott International, Inc.

 

•   Sabre Corporation*

 

Prior directorships:

 

•   Chubb Limited

 

 

Mr. Kellner brings to the Board extensive airline industry experience developed during his 14 years of service in key leadership positions at Continental Airlines, including Chairman, Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer. Mr. Kellner possesses a deep understanding of strategic planning, customer requirements, and operational management in the airline industry. As CEO of Continental Airlines, Mr. Kellner led a highly regulated global airline committed to safety through strong training programs, as well as coordination and integration among pilots, civil aviation authorities, and other internal and external stakeholders. He also has deep experience in meeting the requirements of numerous safety and regulatory compliance regimes around the world. In addition, Mr. Kellner has detailed finance and accounting knowledge gained principally from his experience as Chief Financial Officer at Continental Airlines and American Savings Bank. Mr. Kellner also brings to the Board corporate governance expertise from his service as lead director of Marriott and as former chairman of Sabre as well as on the boards of other Fortune 500 companies. As a result of his leadership experience in the airline industry, his record of independent leadership at Boeing, and his distinguished service on other corporate boards, the Board elected Mr. Kellner to serve as Chairman.

 

*  Mr. Kellner has informed Sabre that he will resign from the Sabre board effective April 2020.

 

 

CAROLINE B. KENNEDY

 

LOGO

 

Former U.S. Ambassador to Japan

 

Boeing director since: 2017

 

Professional highlights:

 

•   U.S. Ambassador to Japan (2013-2017)

 

•   Chief Executive of the Office of Strategic Partnerships of NYC Dept. of Education (2002-2004)

 

•   Vice Chair, The Fund for Public Schools (2002-2011)

  

Independent: Yes

 

Age: 62

 

 

Ambassador Kennedy brings to the Board international business and diplomatic experience, including as U.S. Ambassador to Japan, which is invaluable to the Board’s deliberations with respect to the Company’s extensive network of international customers, suppliers, and other stakeholders. In addition to her international and diplomatic experience, Ambassador Kennedy has held high-level positions on several prominent nonprofit boards and been a vocal advocate and leader on a range of education issues vital to the U.S. industrial base, such as increased science, technology, engineering, and math education for women. Ambassador Kennedy’s diversity of experience and accompanying insights broaden and strengthen the Board in its deliberative process and responsibilities in the areas of risk oversight, long-term strategic planning, and talent development.

 

LOGO  

 

      2020 Proxy Statement

 

 

 

 

      15

 

 


Table of Contents

ELECTION OF DIRECTORS (ITEM 1)

 

 

STEVEN M. MOLLENKOPF

 

LOGO

 

CEO, Qualcomm Incorporated

 

Boeing director since: N/A

 

Professional highlights:

 

•   Chief Executive Officer, Qualcomm Incorporated (2014-present)

 

•   Chief Executive Officer-elect and President, Qualcomm Incorporated (2013-2014)

 

•   President and Chief Operating Officer, Qualcomm Incorporated (2011-2013)

  

Independent: Yes

 

Age: 51

 

Other current directorships:

 

•   Qualcomm Incorporated

 

Prior directorships:

 

•   General Electric Company

 

 

Mr. Mollenkopf experience as the Chief Executive Officer and Chief Operating Officer of Qualcomm, an engineering-driven, high-technology manufacturing company, will enable him to bring critical insights to the Board in such areas of engineering leadership, risk management, leading a complex business with a global reach, and oversight of large-scale efforts to develop and test new technologies. A long-time engineer who started with Qualcomm over 25 years ago, Mr. Mollenkopf also possesses expertise and direct leadership experience in precision engineering, project management, manufacturing, quality control, and designing testing regimes for complex systems. Mr. Mollenkopf is a published IEEE (Institute of Electrical and Electronics Engineers) author and an inventor on 38 patents in areas such as power estimation and measurement, multi-standard transmitters, and wireless communication transceiver technology. He holds a B.S. degree in Electrical Engineering from Virginia Tech and an M.S. degree in Electrical Engineering from the University of Michigan.

 

 

JOHN M. RICHARDSON

 

LOGO

 

31st Chief of Naval Operations, U.S. Navy; Former Director of the Naval Nuclear Propulsion Program, U.S. Navy

 

Boeing director since: 2019

 

Professional highlights:

 

•   31st Chief of Naval Operations, U.S. Navy (2015-2019)

 

•   Director of the Naval Nuclear Propulsion Program, U.S. Navy (2012-2015)

  

Independent: Yes

 

Age: 59

 

Other current directorships:

 

•   The Exelon Corporation

 

 

Admiral Richardson brings deep expertise in safety, regulation, and oversight of complex, high-risk systems, as well as extensive crisis management and national security experience. During his 37 years of service in the U.S. Navy, Admiral Richardson gained valuable operational and national security experience, safely managing over 100 nuclear power plants operating on nuclear-powered warships, serving in four nuclear submarines, including commanding the submarine USS Honolulu, and serving as naval aide to the President of the United States. Admiral Richardson brings extensive experience managing operations on a global basis. As Chief of Naval Operations, he was responsible for the management of a $160 billion budget covering 600,000 sailors and civilians, over 70 installations, 290 warships and over 2,000 aircraft worldwide. As a result of his safety and operational knowledge, the Board elected Admiral Richardson to the Aerospace Safety Committee, as well as Chair of the Special Programs Committee. He earned a bachelor of science degree in physics from the U.S. Naval Academy, a master’s degree in electrical engineering from the Massachusetts Institute of Technology and Woods Hole Oceanographic Institution and a master’s degree in National Security Strategy from the National War College.

 

 

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ELECTION OF DIRECTORS (ITEM 1)

 

 

SUSAN C. SCHWAB

 

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Former U.S. Trade Representative

 

Boeing director since: 2010

 

Professional highlights:

 

•   Professor, School of Public Policy (2009-present)

 

•   Strategic Advisor, Mayer Brown LLP (2010-present)

 

•   U.S. Trade Representative, Executive Office of the President (2006-2009)

 

•   Deputy U.S. Trade Representative (2005-2006)

 

•   President and CEO, University System of Maryland Foundation (2004-2005)

  

Independent: Yes

 

Age: 64

 

Other current directorships:

 

•   Caterpillar Inc.

 

•   FedEx Corporation

 

•   Marriott International, Inc.

 

 

Ambassador Schwab brings unique global and governmental perspectives and experience to the Board and its deliberations. Ambassador Schwab’s extensive experience leading large international trade negotiations positions her well to advise her fellow directors and our senior management on a wide range of key issues facing Boeing through its relationships with non-U.S. companies and governments. Ambassador Schwab’s vast experience in the U.S. government and in both public policy formulation and the management and leadership of a global network of trade offices also enables her to advise Boeing on the many challenges and opportunities in engaging with governments at home and abroad. In addition, as a result of Ambassador Schwab’s prior business experience and current service on other Fortune 100 corporate boards, she brings expertise to the Board on a wide range of strategic, financial, corporate governance, and compensation matters.

 

 

RONALD A. WILLIAMS

 

LOGO

 

Former Chairman, President & CEO, Aetna Inc.

 

Boeing director since: 2010

 

Professional highlights:

 

•   Chairman & CEO, RW2 Enterprises, LLC (2011-present)

 

•   Chairman, President & CEO, Aetna Inc. (Chairman 2006-2011; President 2002-2007; CEO 2006-2010)

 

•   Executive VP & Chief of Health Operations, Aetna Inc. (2001-2002)

  

Independent: Yes

 

Age: 70

 

Other current directorships:

 

•   American Express Company

 

•   Johnson & Johnson

 

Prior directorships:

 

•   Envision Healthcare Corporation

 

 

Mr. Williams brings to the Board significant strategic, leadership, operations, and management experience from his tenure at Aetna, including as Chairman and Chief Executive Officer. With more than 25 years of experience in the health care industry, Mr. Williams provides valuable insight into health insurance and employee benefits best practices, as well as the many related areas associated with managing the requirements of companies in industries with large numbers of employees in U.S. and non-U.S. locations. Mr. Williams also brings experience in significant corporate transformations from his time at Aetna. In addition, his service as lead director and chair of the risk committee of American Express has enhanced his expertise in risk management at large, global companies. In recognition of Mr. Williams’ significant knowledge and understanding of corporate finance, the Board elected him to serve as Chair of the Finance Committee.

 

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THE BOARD OF DIRECTORS UNANIMOUSLY

RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES.

 

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CORPORATE GOVERNANCE

Our corporate governance materials, including our Corporate Governance Principles, the charters of each of the Board’s standing committees, our Director Independence Standards, and our codes of conduct for directors, finance employees, and all employees, may be viewed on our website at www.boeing.com/company/general-info/corporate-governance.page. The GON Committee regularly reviews our governance practices and policies and proposes appropriate modifications for adoption by the Board. As we discuss elsewhere in this proxy statement, we have made several enhancements to our practices and policies in the last year, including changes designed to sharpen our focus on safety and ensure that the Board’s leadership structure and roster of standing committees best enables adequate oversight of key risks. Meanwhile, we continue to engage with shareholders, customers, suppliers, and other stakeholders to ensure that our governance practices evolve as our business and the future of aerospace evolve.

Director Independence

 

Board Independence

Our Corporate Governance Principles require that at least 75% of the Board satisfy the New York Stock Exchange, or NYSE, criteria for independence. For a director to be considered independent, the Board must determine, after consideration of all relevant facts and circumstances, that he or she has no material relationship with us other than as a director, either directly or as a partner, shareholder, or executive officer of another entity that has a relationship with Boeing. In addition, the Board has adopted Director Independence Standards to assist the Board in its assessment of director independence. These standards are designed to supplement the requirements of the NYSE listing standards. If a director or nominee has a relationship with Boeing that is not addressed in the Director Independence Standards, the members of the Board who have already been determined to be independent shall consider all relevant facts and circumstances and determine whether the relationship is material.

The Board has reviewed all direct and indirect relationships between Boeing and each of our directors and director nominees, and has determined that all of our directors and director nominees, other than Mr. Calhoun, are independent. Accordingly, more than 92% of our current Board nominees are independent.

Committee Independence

The Corporate Governance Principles require that all members of the Audit, GON, and Compensation Committees be independent, both under the Director Independence Standards and pursuant to any regulatory requirements. The Board has determined that all members of these committees satisfy all applicable independence requirements.

Leadership Structure

 

The GON Committee, in consultation with the other independent directors, evaluates on an ongoing basis whether the Board’s leadership structure is appropriate to effectively address the evolving needs of our business and the long-term interests of our shareholders. The Committee then makes recommendations to the Board concerning the Board’s leadership structure, including whether the roles of Chairman and CEO should be separated or combined. The Board, in accordance with our By-Laws, elects a Chairman from among the directors. The Board believes it is in the best interests of the Company and its shareholders for the Board to determine which director is best qualified to serve as Chairman in light of the circumstances at the time, rather than based on a fixed policy. As a result, the roles of Chairman and CEO have been split at some times, while at other times the roles have been combined. In the event that the Chairman is not an independent director, our Corporate Governance Principles require that an independent Lead Director be elected on an annual basis by a majority of the independent directors following a recommendation from the GON Committee.

For the first part of 2019, Dennis Muilenburg, our former President and CEO, served as Chairman, while David Calhoun, then an independent member of the Board, served as independent Lead Director. In October 2019, the Board elected Mr. Calhoun to serve as Chairman, with Mr. Muilenburg continuing to serve as President and CEO as well as a member of the Board. In December 2019, Mr. Calhoun was elected President and CEO. In conjunction with this transition in executive leadership, the Board elected Larry Kellner to serve as Chairman.

The Board believes that it is currently in the best interests of our shareholders that the Chairman role be held by Mr. Kellner, who is an independent director. This leadership structure allows Mr. Calhoun to focus on executing our strategic imperatives, including safely returning the 737 MAX to service, sharpening our focus on our core values of

 

 

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safety, quality, and integrity, and increasing transparency with each of our stakeholders. Meanwhile, in his capacity as Non-Executive Chairman, Mr. Kellner can focus on leading the Board, ensuring that it provides strong oversight of management and that all directors have access to the resources required to discharge their duties appropriately.

Shareholder Outreach

 

 

Boeing has long believed that the delivery of sustainable, long-term value requires regular dialogue with, and accountability to, our shareholders. As a result, our management team participates in numerous investor meetings to discuss our business, strategy, and financial results each year. These meetings generally include in-person, telephone, and webcast engagements, as well as investor conferences and tours of certain Boeing facilities. In addition, during 2019, we discussed governance, executive compensation, sustainability, corporate culture, and other matters with a substantial number of shareholders representing holdings both large and small. Several of our directors, including our

 

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   current CEO when he served as Lead Director, Non-Executive Chairman and the Chairs of the Compensation Committee and Aerospace Safety Committee, participated in some of these discussions. We believe these meetings help ensure that the Board and management understand our shareholders’ priorities and work to address them effectively. The Board considers feedback from these conversations, as well as the results of management and shareholder proposals voted on at our shareholders’ meetings, during its deliberations. Feedback from shareholders has been addressed in recent Board discussions on a variety of topics, including shareholder proposals, company culture, executive compensation, board refreshment, and proxy disclosures, often resulting in changes to our policies and practices. In addition, for detail on the how the Board has acted, and continues to act, in response to shareholder concerns discussed following the 737 MAX tragedies, see “The Boeing Board: Learning and Taking Action” beginning on page 1.

Board Committees

 

The Board has six standing committees, each of which operates under a Board-approved charter. In April 2019 the Board created the temporary Committee on Airplane Policies and Processes. The Board assigned this committee of independent directors, which was chaired by Admiral Giambastiani, the responsibility to recommend improvements to the Company’s policies and procedures in order to ensure the highest level of safety for our products and services. Between its formation and the delivery of its final recommendations, this Committee held four formal meetings and more than a dozen informal sessions with participation from various members of the Committee, other independent directors, and Boeing experts as well as independent experts in safety-related matters both in aerospace and other industries. One of the Committee’s recommendations was the formation of a permanent Aerospace Safety Committee. For information on the other recommendations of the Committee on Airplane Policies and Processes, see “The Boeing Board: Learning and Taking Action” beginning on page 1.

 

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The Chair of each committee reviews and discusses the agendas and materials for meetings with senior management in advance of distribution to the other committee members, and reports to the Board on topics reviewed and actions taken at each committee meeting. The table below sets forth the current membership of each of the standing committees, the independence of each director, and the number of meetings each committee held in 2019.

 

    

Independent

Director

  Aerospace
Safety
Committee
  Audit
Committee
  Compensation
Committee
  Finance
Committee
 

GON

Committee

  Special
Programs
Committee

 

Number of Meetings in 2019

 

 

 

 

2#

 

 

11

 

 

8

 

 

7

 

 

6

 

 

1

 

Robert A. Bradway  LOGO

 

 

   

 

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David L. Calhoun

             

 

Arthur D. Collins Jr.

 

 

     

 

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Edmund P. Giambastiani Jr.

 

 

 

 

LOGO

 

 

LOGO

       

 

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Lynn J. Good  LOGO

 

 

 

 

LOGO

 

 

LOGO

       

 

Nikki R. Haley

 

 

   

 

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LOGO

   

 

Lawrence W. Kellner LOGO LOGO

 

 

 

 

LOGO

 

 

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Caroline B. Kennedy

 

 

   

 

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Edward M. Liddy*

 

 

     

 

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John M. Richardson

 

 

 

 

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Susan C. Schwab

 

 

     

 

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Ronald A. Williams LOGO

 

 

   

 

LOGO

   

 

LOGO

   

 

LOGO

 

Mike S. Zafirovski*

 

 

         

 

LOGO

     

 

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  *

Messrs. Liddy and Zafirovski will retire from the Board at the annual meeting.

 

  # 

In addition, the Board’s temporary Committee on Airplane Policies and Processes held four formal meetings and more than a dozen informal meetings between its formation in April 2019 and its dissolution in August 2019, at which time it was replaced with the permanent Aerospace Safety Committee.

 

LOGO  Chairman of the Board

 

     LOGO  Audit Committee Financial Expert

 

LOGO  Committee Chair

  

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Aerospace Safety Committee

The Aerospace Safety Committee, established by the Board in 2019, is responsible for directly overseeing our engineering, design, development, manufacture, production, operations, maintenance, and delivery of aerospace products and services, in order to ensure the safety of our commercial, defense, space, and other aerospace products and services.

In order to fulfill this responsibility, the Aerospace Safety Committee provides direct oversight over:

 

 

our safety-related policies and processes;

 

 

certification activities;

 

 

our policies and processes for engaging with and supporting the regulatory oversight of the Federal Aviation Administration, the Department of Defense, the National Aeronautics and Space Administration, and non-U.S. commercial, defense, and space aviation safety regulators;

 

 

our participation in and support of accident investigations conducted by the National Transportation Safety Board and other domestic and international investigatory authorities, including our responses to material findings and conclusions of such investigations;

 

 

our pilot training programs and services; and

 

 

cybersecurity with respect to our aerospace products.

In addition, the Aerospace Safety Committee consults with the Compensation Committee in connection with the safety review portion of executive individual performance evaluations. The Aerospace Safety Committee is composed entirely of directors who satisfy NYSE director independence standards and our Director Independence Standards.

 

 

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Audit Committee

The Audit Committee oversees our independent auditor and accounting and internal control matters. Its principal responsibilities include oversight of:

 

 

the integrity of our financial statements;

 

 

our internal control environment and compliance with legal and regulatory requirements;

 

 

our independent auditor’s qualifications and independence;

 

 

our processes for assessing key strategic, operational and compliance risks;

 

 

the performance of our internal audit function;

 

 

the performance of our independent auditor.

At each meeting, representatives of Deloitte & Touche LLP, our independent registered public accounting firm, are present to review accounting, control, auditing, and financial reporting matters. In addition, the Audit Committee meets in executive session after every meeting with representatives of Deloitte & Touche LLP, our independent auditors, and also meets regularly in executive session with one or more of our Chief Financial Officer, our Chief Accounting Officer, our General Counsel, our Senior Vice President, Office of Internal Governance and Administration, and our Vice President, Corporate Audit. The Audit Committee also oversees key strategic, operational and compliance risks on behalf of the Board including those set forth under “Audit Committee Risk Oversight” on page 22. The Audit Committee also prepares the Audit Committee Report included on page 65. The Audit Committee is composed entirely of directors who satisfy NYSE director independence standards and our Director Independence Standards, as well as additional independence standards applicable to audit committee members established pursuant to applicable law. The Board has determined that each Audit Committee member is financially literate as defined by NYSE listing standards, and that Ms. Good and Messrs. Bradway, Kellner, and Williams are audit committee financial experts as defined by the rules of the Securities and Exchange Commission, or SEC.

Compensation Committee

The Compensation Committee oversees our executive and equity compensation programs. The Compensation Committee is composed entirely of directors who satisfy NYSE director independence standards and our Director Independence Standards, as well as additional independence standards applicable to compensation committee members established pursuant to applicable law. Additional information about the Compensation Committee, including a more detailed list of its principal responsibilities, is set forth under “Governance of Pay-Setting Process” on page 45. In addition, certain of the Compensation Committee’s risk oversight responsibilities are set forth under “Compensation Committee Risk Oversight” on page 23.

Finance Committee

The Finance Committee’s principal responsibilities include reviewing and, where appropriate, making recommendations to the Board with respect to:

 

 

our funding plans and funding plans of our subsidiaries;

 

 

our significant financial exposures, contingent liabilities, and major insurance programs;

 

 

proposed dividend actions, stock splits, and repurchases, and issuances of debt or equity securities;

 

 

strategic plans and transactions, including mergers, acquisitions, and divestitures, as well as joint ventures and other equity investments;

 

 

customer financing activities;

 

 

our credit agreements and short-term investment policies; and

 

 

employee benefit plan trust investment policies, administration, and performance.

In addition, the Finance Committee has key risk oversight responsibilities that are described under “Finance Committee Risk Oversight” on page 23. The Finance Committee is composed entirely of directors who satisfy NYSE director independence standards and our Director Independence Standards.

Governance, Organization and Nominating Committee

The GON Committee’s principal responsibilities include:

 

 

making recommendations to the Board concerning the organization, leadership structure, size, and composition of the Board, as well as the compensation and benefits of nonemployee directors;

 

 

identifying and recommending to the Board candidates who are qualified to become directors under the criteria set forth in our Corporate Governance Principles;

 

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assessing the independence of directors and making recommendations to the Board with respect to such assessments;

 

 

pre-approving, and monitoring on an ongoing basis, directors’ service on the boards of other for-profit companies;

 

 

overseeing the annual performance evaluation process for the Board;

 

 

senior management succession planning, including recommending to the Board nominees for CEO and other senior leadership roles;

 

 

monitoring and reviewing the performance of our CEO;

 

 

monitoring compliance with stock ownership requirements for directors;

 

 

considering possible conflicts of interest of directors and officers; and

 

 

reviewing corporate governance developments and, where appropriate, making recommendations to the Board on corporate governance policies and practices, including any revisions to our Corporate Governance Principles.

The GON Committee also oversees key risks on behalf of the Board, including those set forth under “GON Committee Risk Oversight” on page 23. From time to time, the GON Committee works with a third-party search firm to identify potential candidates to serve on the Board. The GON Committee is composed entirely of directors who satisfy NYSE director independence standards and our Director Independence Standards.

Special Programs Committee

The Special Programs Committee reviews Boeing’s work on classified U.S. government programs.

Risk Oversight

 

As a company at the forefront of innovation, Boeing takes calculated risks each day. It is the responsibility of the Board and senior management to ensure that we avoid imprudent risks and mitigate the many strategic, technological, operational, and compliance risks we face, all with our core values of safety, quality, and integrity at the forefront. Senior management is responsible for day-to-day management of risk, including the creation of appropriate risk management policies and procedures. The Board is responsible for overseeing management in the execution of its risk management responsibilities and for assessing the Company’s approach to risk management. The Board regularly assesses significant risks to the Company in the course of reviews of corporate strategy and the development of our long-range business plan, including significant new development programs.

As part of its responsibilities, the Board and its standing committees also regularly review strategic, operational, financial, compensation, and compliance risks with senior management. Examples of risk oversight activities conducted by the Board’s committees, subject to committee report-outs and full discussion at the Board level, are set forth below.

Aerospace Safety Committee Risk Oversight

 

 

Evaluate key risks related to the safety of the Company’s aerospace products and services

For more information on oversight of these risks, see “Aerospace Safety Committee” on page 20.

Audit Committee Risk Oversight

 

 

Evaluate overall risk assessment and risk management practices

 

 

Perform central oversight role with respect to financial statement, disclosure, and compliance risks

 

 

Evaluate the effectiveness of our ethics and compliance program, including through regular reports from our Senior Vice President, Office of Internal Governance and Administration

 

 

Lead the Board’s oversight of risks related to cybersecurity

 

 

Meet in executive session after every meeting with Deloitte & Touche LLP, our independent auditors, as well as regularly with one or more of our Chief Financial Officer, our Chief Accounting Officer, our General Counsel, our Senior Vice President, Office of Internal Governance and Administration, and our Vice President, Corporate Audit to discuss financial and/or compliance risks, and report any findings to the Board

 

 

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GON Committee Risk Oversight

 

 

Oversee risks related to the Company’s governance, including shareholder outreach efforts on governance-related matters and ensuring the Board’s continued ability to provide independent oversight of management

 

 

Oversee risks related to the Company’s succession planning process

 

 

Evaluate related party transactions

 

 

Evaluate risks in connection with the Company’s nonemployee director compensation program, in consultation with the Committee’s independent compensation consultant

Finance Committee Risk Oversight

 

 

Evaluate risk related to Boeing’s capital structure, significant financial exposures, and major insurance programs

 

 

Oversee risks related to investments in and costs related to our employee benefit retirement plans

 

 

Oversee risks related to the Company’s cash deployment strategy

Compensation Committee Risk Oversight

 

 

Evaluate risk in connection with the design and oversight of compensation programs, in consultation with the Committee’s independent compensation consultant and the Aerospace Safety Committee

For more information on oversight of risks related to our compensation practices, see “Compensation and Risk” on page 49.

Additional information about the Board’s responsibilities related to the management of risk is set forth in our Corporate Governance Principles.

Director Retirement Policy

 

Our Corporate Governance Principles generally require that no director may serve if he or she would be 74 years of age or older at the time of election. In connection with this policy, Mr. Liddy is not standing for reelection at this meeting.

Board Self-Evaluation

 

The Board and its standing committees perform thorough self-evaluations that are overseen by the GON Committee and are designed to enhance the Board’s effectiveness and identify areas of potential improvement. In 2019, these self-evaluations included the distribution of questionnaires to each director, wide-ranging Board and committee discussions in executive session led by the independent Lead Director, the independent Non-Executive Chairman, or relevant committee chair, and opportunities for discussions between individual directors and the Corporate Secretary, the independent Lead Director, the independent Non-Executive Chairman, and/or any relevant committee chair. Topics covered by these self-evaluations included:

 

 

whether the structure of the Board and its committees is appropriate in light of the Company’s strategic objectives;

 

 

the Board’s effectiveness in overseeing and monitoring Boeing’s long-term strategy, including its long-range business plan;

 

 

the effectiveness of the Board’s oversight of key strategic, operational, and compliance risks;

 

 

the adequacy of the written materials and presentations prepared by management for the Board;

 

 

the quality of the Board’s deliberations, as well as whether there are adequate open lines of communication between directors and members of management;

 

 

whether executive sessions are held with the appropriate frequency and cover an appropriate range of topics;

 

 

the extent to which the mix of skills, attributes, and qualifications of the individual directors enable the Board to perform effectively; and

 

 

whether individual directors are prepared for each meeting and contribute substantively to the deliberations of the Board and any relevant committee.

Following these self-evaluations, the GON Committee Chair discusses areas for potential improvement with the Board and/or relevant committees and, if necessary, identifies steps required to implement these improvements. The Board has made several changes to how it operates based in part on the results of recent self-evaluations, including replacing the role of independent Lead Director with an independent Non-Executive Chairman, creating the Aerospace Safety Committee, and identifying safety expertise as a key skill to consider when recruiting director candidates, as well as

 

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continuing to increase the frequency of one-on-one director interaction with senior management succession candidates and increasing frequency of reviews of key risks such as cybersecurity.

Meeting Attendance

 

During 2019, the Board held ten meetings. Each incumbent director nominee attended at least 94% of the meetings of the Board and the committees on which he or she served during 2019, and average attendance at these meetings was approximately 98%. In addition, during 2019 our directors participated in extended discussions outside of formal meetings, both as a group and in informal sessions, and both amongst themselves and with members of management and outside experts. Many of these activities took place at Boeing facilities around the U.S. The Board also received very frequent briefings on the 737 MAX program following the 737 MAX accidents, and was deeply involved in decisions regarding the Company’s response to these tragedies, the subsequent grounding of the aircraft, and the Company’s efforts to safely return the 737 MAX to service and rebuild stakeholder trust.

Absent extenuating circumstances, directors are required to attend our annual meetings of shareholders, and all of the directors attended our 2019 Annual Meeting.

Communication with the Board

 

The Board has established a process whereby shareholders and other interested parties can send communications to our independent Chairman, to the nonemployee directors as a group, or to the Audit Committee. This process is described at www.boeing.com/company/general-info/corporate-governance.page.

Sustainability

 

Boeing is helping to build a more sustainable future for our industry and our planet. For more information and resources, visit http://www.boeing.com/principles/esg/index. page.

Environmental

We are committed to global environmental leadership through aerospace innovation with a companywide focus on emitting less carbon, using less energy and water, and creating less waste while protecting human and environmental health in communities across the globe.

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Boeing’s commitment to innovation means more than just game-changing aerospace products and services. We extend that commitment to how we take care of the environment and engage with the communities in which we operate as well as the processes that govern our environmental strategy and policy. Boeing is pursuing innovation and leadership that will build a brighter, more sustainable future for our employees, customers, industry, communities, and people who fly on our airplanes. For a link to our most recent Environment Report and additional information on the progress we have made at improving the environmental performance of our products and services, as well as our operations, visit www.boeing.com/principles/environment.

 

 

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Social

Boeing Global Engagement

 

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Through purposeful community investments, employee engagement, and thoughtful advocacy efforts, Boeing and its employees support innovative partnerships and programs that align with our strategic objectives, create value, and help build better communities worldwide. First, we are committed to helping children and youth achieve their potential through educational enrichment and support programs that promote academic success, independence, and economic sustainability. Second, through hiring and employment programs as well as grants and volunteer activities, we help armed forces veterans and their families’ transition successfully into civilian life. Third, we believe that maintaining a local focus and flexibility to respond to local needs is vital to Boeing’s charitable investment and employee engagement strategy. As a result, we focus our expertise and employee volunteerism on issues that are of importance to each site and region of the world where our company operates. For additional information, and to see how Boeing and its employees give their time, talent, and resources in communities around the world, visit https://www.boeing.com/principles/global-engagement-summary.page and download our most recent Global Engagement Portfolio.

Global Equity, Diversity and Inclusion

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Diversity and inclusion are core values at Boeing, and we have a demonstrated record of living those values every day. We continue to see growth in our diverse representation and number of global employees at Boeing. We know that there is still work to be done, but we continually strive to meet and exceed our commitments in this area. For example, we continue to fuel the diversity of our workforce through education, outreach, transparency and accountability. These commitments will help us reach our goal of creating enduring change at Boeing and in our world. For additional information, visit http://www.boeing.com/principles/diversity-and-inclusion/index.page.

 

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Ethics

At Boeing, ethical business conduct is at the core of how we operate. We have reflected on events of the past year and are committed to improving transparency and accountability to earn the trust of all stakeholders. Our employees sign the Boeing Code of Conduct annually, highlighting that all employees are held accountable for ensuring that our values remain foundational to our work and that we follow all applicable laws, regulations, and company policies. We are committed to creating an open and accountable workplace where employees feel empowered to speak up and raise issues. With this in mind, we provide multiple channels to speak up, ask for guidance, and report concerns. In 2019, Boeing employees submitted approximately 9,800 requests to Ethics and Business Conduct. From answering questions about conflicts of interest and business courtesies to formally investigating and addressing concerns, we are committed to helping employees navigate challenging situations and uphold our values. For additional information, visit https://www.boeing.com/principles/ethics-and-compliance.page.

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Human Rights

Boeing is committed to responsible business practices and the promotion of positive changes in peoples’ lives while simultaneously creating value for our customers, shareholders, and other stakeholders. We view human dignity and freedom from oppression as fundamental to a principled and productive work environment. Boeing’s Code of Basic Working Conditions and Human Rights articulates these principles, and we have developed policies and practices designed to enforce the Code’s provisions throughout our operations around the world. We also expect similar behavior from our suppliers, and we require that the principles set forth in the Code are mandated in all of our supplier contracts. We also monitor our suppliers’ compliance with these principles. To learn more about Boeing’s position on human rights issues, visit http://www.boeingsuppliers.com/index.html and https://www.boeing.com/principles/human-rights.page.

Codes of Conduct

 

The Board expects directors, officers and employees to act ethically, including by adhering to all applicable codes of conduct, at all times. The codes of conduct are available at www.boeing.com/company/general-info/corporate-governance.page. Waivers with respect to these codes for directors and officers may be granted only by the Board, and any such waiver must be promptly disclosed on our website. No waivers were requested during 2019. Directors are required to promptly inform the Chairman of the Board or the Chair of the GON Committee of any actual or potential conflicts of interest and to recuse themselves from any discussion or decision affecting their personal, business or professional interests.

Compensation of Directors

 

We have designed our nonemployee director compensation program to achieve the following objectives:

 

 

align directors’ interests with the long-term interests of our shareholders;

 

 

attract and retain outstanding director candidates with diverse backgrounds and experiences; and

 

 

recognize the substantial time commitment required to serve as a Boeing director.

The GON Committee reviews Boeing’s director compensation program on an annual basis. When making its recommendations, the GON Committee considers director compensation levels at the same group of companies used to benchmark the named executive officers’ compensation. See “Benchmarking Against Our Peer Group” on page 47 for more information. Pay Governance LLC, or Pay Governance, served during 2019 as the GON Committee’s independent consultant with respect to the compensation of our directors.

 

 

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Our nonemployee director compensation program consists of cash (board, committee chair, and Non-Executive Chairman retainer fees) and retainer stock units that are not distributed until after termination of Board service. In addition, we match director contributions to eligible non-profit organizations, up to a maximum match of $31,000 per year. Directors who are Boeing employees do not participate in the nonemployee director compensation program.

Cash Retainers

In 2019, our nonemployee directors earned an annual cash retainer fee of $135,000. We also paid the following additional annual retainer fees to directors serving in leadership positions, pro-rated to reflect time in those positions: Lead Director $35,000; Aerospace Safety Committee (and its temporary predecessor committee) Chair $50,000; Audit Committee Chair $25,000; Compensation, GON, and Finance Committee Chairs $20,000; and Special Programs Committee Chair $15,000. The GON Committee recommended, and the Board approved, an additional annual retainer fee of $250,000 for the non-executive Chairman of the Board effective January 10, 2020.

Nonemployee directors may defer all or part of their cash compensation into a stock unit account as deferred stock units or in an interest-bearing, cash-based account. Directors do not have the right to vote or transfer deferred stock units. Deferred stock units earn dividend equivalents, which are credited as additional deferred stock units. Directors may elect to receive the distribution of shares in respect of these units in a lump sum or in annual payments over a maximum of 15 years beginning no earlier than the January following the year of the director’s termination of Board service. Directors elected to defer 2019 cash compensation into deferred stock units as follows: for each of Ms. Good, Ambassador Schwab, and Messrs. Bradway and Zafirovski, $135,000 for 376 units; for Mr. Calhoun, $190,279 for 529 units; for Mr. Collins, $155,000 for 432 units; and for Mr. Williams, $155,279 for 432 units.

Retainer Stock Units

In 2019, our nonemployee directors earned equity compensation valued at $200,000 per year in the form of retainer stock units, which are distributed as shares of Boeing stock after termination of Board service. The Board believes that retainer stock units further align directors’ interests with the long-term interests of our shareholders. Each nonemployee director received an aggregate of 567 retainer stock units for services provided to the Board in 2019, except Mr. Duberstein who received 286 units, Ambassador Haley who received 367 units, and Admiral Richardson who received 264 units (granted to him in early 2020), based on each director’s partial year of service on the Board. Directors do not have the right to vote or transfer retainer stock units. Retainer stock units earn dividend equivalents, which are credited as additional retainer stock units. Directors may elect to receive the distribution of shares in respect of these units in a lump sum or in annual payments over a maximum of 15 years beginning no earlier than the January following the year of the director’s termination of Board service.

2019 Director Compensation Table

The following table sets forth 2019 compensation for each nonemployee director.

 

  Director   

Fees Earned
or Paid in

Cash ($)(10)

  

Stock

Awards
($)(11)

   All Other
Compensation
($)(12)
   Total
($)

  Robert A. Bradway

       135,000        201,111        17,500        353,611

  David L. Calhoun(1)

       190,279        201,111        31,000        422,390

  Arthur D. Collins Jr.(2)

       155,000        201,111        31,000        387,111

  Kenneth M. Duberstein(3)

       67,500        101,111        123,903        292,514

  Edmund P. Giambastiani Jr.(4)

       182,247        201,111        10,550        393,908

  Lynn J. Good(5)

       135,000        201,111        31,000        367,111

  Nikki R. Haley(6)

       90,801        134,521        31,000        256,322

  Lawrence W. Kellner(7)

       160,000        201,111        31,000        392,111

  Caroline B. Kennedy

       135,000        201,111        2,100        338,211

  Edward M. Liddy

       135,000        201,111               336,111

  John M. Richardson(8)

       25,151                      21,151

  Susan C. Schwab

       135,000        201,111        21,064        357,175

  Ronald A. Williams(9)

       155,279        201,111        21,000        377,390

  Mike S. Zafirovski

       135,000        201,111        31,000        367,111

 

(1)

Mr. Calhoun served as Lead Director until October 11, 2019, as GON Committee Chair until December 22, 2019, and as non-executive Chairman of the Board from October 11, 2019 until December 22, 2019. Mr. Calhoun ceased to serve as a member of any Board committee on December 23, 2019.

 

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(2)

Mr. Collins served as Compensation Committee Chair for all of 2019.

(3)

Mr. Duberstein retired from the Board on April 29, 2019.

(4)

Admiral Giambastiani began serving as Special Programs Committee Chair on April 29, 2019. He served as Chair of the Committee on Airplane Policies and Processes from April 4, 2019 until August 26, 2019 (when the temporary committee was replaced with a permanent Aerospace Safety Committee). He began serving as Aerospace Safety Committee Chair on August 26, 2019.

(5)

Ms. Good began serving as Audit Committee Chair on December 23, 2019.

(6)

Ambassador Haley was elected to the Board on April 29, 2019.

(7)

Mr. Kellner served as Audit Committee Chair from January 1, 2019 until December 23, 2019, and as non-executive Chairman of the Board beginning on December 22, 2019.

(8)

Admiral Richardson joined the Board on October 25, 2019, after the payment date for the fourth quarter 2019 installment of retainer fees. The amounts shown reflect cash compensation paid for 2019 service during the first quarter of 2020. Mr. Richardson was also granted retainer stock units with a grant date fair value of $37,260 in the first quarter of 2020 for services in 2019.

(9)

Mr. Williams served as Finance Committee Chair for all of 2019.

(10)

Reflects total cash compensation paid in 2019 and includes amounts deferred at the director’s election pursuant to our Deferred Compensation Plan for Directors. Cash compensation for nonemployee directors is paid in four quarterly installments as of the first business day of each quarter and is pro-rated for directors who join the Board during a quarter.

(11)

Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for the retainer stock units awarded to each nonemployee director in 2019. Retainer stock units are awarded in four quarterly installments as of the first business day of each quarter and are pro-rated for directors who join the Board during a quarter. Due to an administrative error, 2019’s first quarterly installment was paid based on 2018 compensation levels and, as a result, additional units were issued to each director in the second quarterly installment. Because the value of the stock retainer units increased during the quarter, the grant date fair value of those units was higher than they would have been had they been issued in the prior installment. As a result, the reported amounts are slightly in excess of the $200,000 annual stock retainer fee. The grant date fair value for these awards is equal to the fair market value of the underlying Boeing stock on the grant date. The “fair market value” for a single trading day is the average of the high and low per share trading prices for Boeing stock as reported by The Wall Street Journal for the New York Stock Exchange Composite Transactions. The following table sets forth the aggregate number of deferred stock units accumulated in each director’s account as of December 31, 2019 from deferrals of cash compensation and retainer stock units, including additional deferred stock units credited as a result of dividend equivalents earned with respect to the deferred stock units.

 

  Director  

Accumulated

    Deferred Stock Units    

  Robert A. Bradway

      3,933

  David L. Calhoun

      25,918

  Arthur D. Collins Jr.

      42,849

  Kenneth M. Duberstein

      60,695

  Edmund P. Giambastiani Jr.

      16,170

  Lynn J. Good

      4,852

  Nikki R. Haley

      371

  Lawrence W. Kellner

      10,932

  Caroline B. Kennedy

      1,420

  Edward M. Liddy

      22,486

  John M. Richardson

      (a) 

  Susan C. Schwab

      15,414

  Ronald A. Williams

      18,019

  Mike S. Zafirovski

      50,129

 

(a)   Admiral Richardson had no accumulated deferred stock units as of December 31, 2019, because he was not paid any director fees for his 2019 service until the first quarter of 2020.

    

 

 

(12)

Consists of gift matching of charitable contributions under the Board Member Leadership Gift Match Program. Directors derive no financial benefit from these charitable contributions. For Mr. Duberstein, the amount shown also includes $92,903 in consulting fees earned by Mr. Duberstein pursuant to a consulting arrangement entered into between him and the Company in August 2019 following his retirement from the Board.

Director Stock Ownership Requirements

 

Our Corporate Governance Principles require each nonemployee director with more than three years of Board service to own stock or stock equivalents with a value of at least three times the annual cash retainer fee, and directors with more than six years of Board service to own stock or stock equivalents with a value of at least five times the annual cash retainer fee. The GON Committee annually reviews whether each nonemployee director has met the applicable requirement, and makes recommendations as appropriate. Each director currently exceeds his or her applicable stock ownership requirement. Directors also are prohibited from engaging in hedging or pledging transactions involving Boeing securities.

 

 

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Compensation Consultant

 

The Compensation Committee engaged Pay Governance to serve as its independent compensation consultant during 2019. In this capacity, Pay Governance advised on peer group pay practices and other relevant benchmarks with respect to executive officer compensation (including compensation decisions in connection with leadership transitions), as well as regulatory developments and compensation trends. In addition, Pay Governance advised the Compensation Committee concerning management’s compensation data and recommendations. The GON Committee also engaged Pay Governance during 2019 to serve as its independent compensation consultant relating to nonemployee director compensation, including with respect to the retainer fee for the Chair of the Aerospace Safety Committee and, beginning in January 2020, for the Board’s Non-Executive Chairman. In connection with performing these roles, Pay Governance took direction from the Compensation and GON Committees, as appropriate, reported directly to the committees, and did not provide any other services to Boeing. See discussion on page 45 under “Governance of Pay-Setting Process.” The Compensation Committee assessed the independence of Pay Governance pursuant to SEC and NYSE rules and determined that no conflict of interest exists that would prevent the compensation consultant from independently representing the Compensation and GON Committees. In making this assessment, the Compensation Committee considered each of the factors set forth by the SEC and the NYSE with respect to the compensation consultant’s independence, including that the consultant provided no services for Boeing other than pursuant to its engagement by the Compensation and GON Committees. The Compensation Committee also determined there were no other factors the Committee should consider in connection with the assessment or that were otherwise relevant to the Committee’s engagement of Pay Governance.

Related-Person Transactions

 

Some of our directors, executive officers, greater than 5% shareholders, and their immediate family members may be affiliated with entities with which we do business in the ordinary course. We carry out transactions with these firms on customary terms, and, in many instances, our directors and executive officers may not have knowledge of them.

Policies and Procedures

We regularly review transactions with related persons, including sales, purchases, transfers of realty and personal property, services received or furnished, use of property and equipment by lease or otherwise, borrowings and loans, guarantees, filings of consolidated tax returns, and employment arrangements. Under our policies and procedures, related persons include our executive officers, directors, director nominees, and holders of more than 5% of our stock, as well as their immediate family members. Any findings are furnished to the Vice President, Accounting and Financial Reporting, who reviews potential related-person transactions for materiality and evaluates the need for disclosure under SEC rules.

In addition, the GON Committee assesses possible conflicts of interest of directors and executive officers, and considers for review and approval or ratification any transaction or proposed transaction required to be disclosed under SEC rules in which Boeing is or is to be a participant and the amount involved exceeds $120,000, and in which a director, director nominee, executive officer, or an immediate family member of such persons has or will have an interest.

Executive officers are also subject to our policies and procedures applicable to all employees, which require them to disclose potential conflicts of interest and the Company to conduct reviews and make determinations with respect to specified transactions. Our Vice President, Ethics and Business Conduct, oversees these reviews and determinations, and refers to the GON Committee for review and approval or ratification possible conflicts of interest involving executive officers. The factors considered in making the determination include the executive officer’s duties and responsibilities and, if the transaction includes another company, (1) the company or business involved in the transaction, including the product lines and market of the company or business, (2) the relationship between us and the other company or business, if any (for example, if the other company is one of our suppliers, customers or competitors), and (3) the relationship between the executive officer or his or her immediate family and the other company or business (for example, owner, co-owner, employee or representative).

Directors are required to disclose to the Chairman of the Board or the Chair of the GON Committee any situation that involves, or may reasonably be expected to involve, a conflict of interest with us, including:

 

 

engaging in any conduct or activities that would impair our relationship with any person or entity with which we propose to enter into a business or contractual relationship;

 

 

accepting compensation from us other than compensation associated with his or her activities as a nonemployee director unless such compensation is approved in advance by the Chair of the GON Committee;

 

 

receiving improper gifts from persons or entities that deal with us; and

 

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using our assets, labor, or information for personal use except as outlined in our policies and procedures or unless approved by the Chair of the GON Committee or as part of a compensation or expense reimbursement program available to all directors.

Directors must recuse themselves from any discussion or decision affecting their personal, business, or professional interests. Finally, pursuant to our Corporate Governance Principles, we may not, directly or indirectly, extend or maintain credit or arrange for or renew an extension of credit in the form of a personal loan to or for any director or executive officer.

Certain Transactions

The following transactions were reviewed and considered in light of the policies and procedures discussed above:

BlackRock, Inc., or BlackRock, is a beneficial holder of more than 5% of our outstanding common stock according to Amendment No. 3 to a Schedule 13G filed by BlackRock with the SEC on February 5, 2020. BlackRock provided investment management services and analytics to the Retirement Plans Trust and the Savings Plans Trust, and received approximately $10.4 million for such services in 2019.

Newport Trust Company, or Newport, is a beneficial holder of more than 5% of our outstanding common stock according to Amendment No. 2 to a Schedule 13G filed by Newport with the SEC on February 11, 2020. Newport is the investment manager for shares of our common stock held by the Savings Plans Trust and is entitled to an annual fee based on the market value of our common stock in the Savings Plans Trust. In 2019, these fees totaled approximately $2.1 million.

T. Rowe Price Associates, Inc., or T. Rowe, is a beneficial holder of more than 5% of our outstanding common stock according to Amendment No. 1 to a Schedule 13G filed by T. Rowe with the SEC on February 14, 2020. T. Rowe received an aggregate of approximately $132,000 for management fees in 2019 from a subsidiary retirement plan.

The Vanguard Group, or Vanguard, is a beneficial holder of more than 5% of our outstanding common stock according to Amendment No. 5 to a Schedule 13G filed by Vanguard with the SEC on February 12, 2020. Vanguard received an aggregate of approximately $512,000 for management fees in 2019 from certain of our subsidiary retirement plans and a trust that funds a portion of our health and welfare plans.

From time to time, we may enter into customary relationships and/or purchase services in the ordinary course of business from one or more of the financial institutions named above and/or their respective affiliates.

Steven Caret has been employed by us since 2004, and is the husband of Leanne Caret, who became an executive officer in 2016. His compensation was established in accordance with our employment and compensation practices applicable to employees with equivalent qualifications, experience, and responsibilities. Mr. Caret’s 2019 compensation was approximately $216,000. He is also eligible to participate in our employee benefit programs on the same basis as other eligible employees. Tony Toulouse has been employed by us since 1989, and is the husband of Anne Toulouse, who served as an executive officer in 2019. His compensation was established in accordance with our employment and compensation practices applicable to executives with equivalent qualifications, experience, and responsibilities. Mr. Toulouse’s 2019 compensation was approximately $574,000. He is also eligible to participate in our employee benefit programs on the same basis as other eligible employees. Neither Mr. Caret nor Mr. Toulouse reported up to his executive officer spouse, directly or indirectly.

 

 

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APPROVE, ON AN ADVISORY BASIS, NAMED EXECUTIVE OFFICER COMPENSATION (ITEM 2)

 

 

 

PROPOSAL SUMMARY

Pursuant to Section 14A of the Securities Exchange Act of 1934, shareholders are being asked to approve, on an advisory basis, the compensation of the named executive officers as set forth under the heading “Compensation Discussion and Analysis” and in the accompanying compensation tables and material. The next advisory vote on executive compensation will occur at our 2021 Annual Meeting of Shareholders.

 

LOGO   The Board recommends that you vote FOR the resolution approving named executive officer compensation.

 

 

In our ongoing efforts to strengthen our enduring commitment to product and services safety and quality, and to the safety of the millions of individuals who use our products every day, we have scrutinized the role that our executive compensation program plays in fulfilling that commitment. Our Compensation Discussion and Analysis, together with the compensation tables and narrative discussion that follow, describes the compensation earned by our named executive officers in 2019. 2019 was a challenging year for Boeing, and as a result, the named executive officers earned no payments under our annual incentive program or the performance award portion of our long-term incentive program for the 2017-2019 performance period. Due to the Company’s strong total shareholder return performance for the three-year period beginning in 2017, our performance-based restricted stock units for 2017-2019, which comprise 25% of our long-term incentive program, paid at 175% of target.

During 2019, we discussed our executive compensation program with many of our shareholders, and we have worked to improve our policies and practices in response to that feedback. We have enhanced our clawback policy as well as created a role for our Aerospace Safety Committee to ensure that the safety of our products and services is a key consideration when making individual compensation decisions. 2020 compensation for our new CEO, David Calhoun, includes a special award of performance-based restricted stock units that will pay out only upon achievement of several specific business milestones, and all of his incentive compensation for 2020 and beyond will be subject to our enhanced clawback policy. Our Compensation Committee also provided no severance or separation payments to our former CEO, Dennis Muilenburg.

These actions build on our existing executive compensation program, which is fundamentally strong, reflects our commitment to achieving financial and operating business goals consistent with our values, stakeholder interests, and responsible pay practices, and includes the following features:

 

 

challenging annual and long-term incentive metrics that align with our business strategy and drive operational excellence, sustainable growth, and responsible risk management;

 

 

86% of our NEOs’ 2019 target compensation was variable and at risk, with 100% of the annual incentive and 75% of long-term incentives tied to pre-set performance goals;

 

 

capped incentive payouts and other protections to avoid excessive risk-taking;

 

 

enhanced focus on safety when evaluating individual executive performance, including formal consultation between Aerospace Safety and Compensation committees;

 

 

a robust clawback policy, which has been expanded to apply to instances of misconduct that compromise the safety of our products or services;

 

 

forfeiture of unvested incentive awards upon termination of employment, with pro-rated vesting only upon death, disability, layoff, or retirement;

 

 

rigorous stock holding period and ownership requirements, including a 6x base salary requirement for our CEO, ensuring that executive officers maintain a significant stake in our long-term success and sustainable growth;

 

 

no accelerated vesting of equity awards in connection with a change in control;

 

 

no employment, except where required by non-U.S. local law;

 

 

no change-in-control agreements;

 

 

no pledging or hedging of Boeing stock;

 

 

benchmarking design practices and pay levels against industry peers and other similarly-sized companies, with pay opportunities generally targeted at or near the median; and

 

 

no tax gross-ups other than for certain relocation expenses.

 

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APPROVE, ON AN ADVISORY BASIS, NAMED EXECUTIVE OFFICER COMPENSATION (ITEM 2)

 

In 2019, our shareholders approved the compensation of our named executive officers with a FOR vote of 92%. In future years, we will continue to work to attract, reward, and retain executives who share our focus on our enduring values of safety, quality, and integrity, operational and financial excellence and sustainable growth. As we demonstrated in 2019, we will also continue to tie compensation to demonstrated individual and Company performance.

This year, we once again request your vote supporting the following nonbinding resolution:

RESOLVED: That the compensation paid to the named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.

 

  LOGO    

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE

FOR THIS PROPOSAL.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation programs for our named executive officers (“NEOs”) for 2019, who are listed below.

 

  Name    Roles During 2019

  Dennis A. Muilenburg

   Former President and Chief Executive Officer

  Gregory D. Smith

   Chief Financial Officer and Executive Vice President, Enterprise Performance and Strategy; Former Interim President and Chief Executive Officer

  Stanley A. Deal

   Executive Vice President, President and Chief Executive Officer, Commercial Airplanes; Former Executive Vice President, President and Chief Executive Officer, Global Services

  Timothy J. Keating

   Executive Vice President, Government Operations

  J. Michael Luttig

   Executive Vice President, Counselor and Senior Advisor to the Board of Directors; Former Executive Vice President and General Counsel

  Kevin G. McAllister

   Former Executive Vice President, President and Chief Executive Officer, Commercial Airplanes

Effective January 13, 2020, David Calhoun was elected as the Company’s President and Chief Executive Officer. Additional details regarding Mr. Calhoun’s compensation is provided below under “2020 Leadership Changes.” Mr. Calhoun served as a director of the Company in 2019, and information regarding his nonemployee director compensation is set forth in “Compensation of Directors” beginning on page 26. Mr. Calhoun resigned from the Compensation Committee in connection with his election as CEO, and he did not participate in any of the Committee or Board’s deliberations with respect to his compensation.

Mr. Muilenburg ceased to serve as President and Chief Executive Officer of the Company on December 22, 2019. Mr. Luttig ceased to serve as Executive Vice President, Counselor and Senior Advisor to the Board on January 1, 2020. Mr. McAllister ceased to serve as Executive Vice President, President and Chief Executive Officer, Commercial Airplanes on October 22, 2019. Additional details are provided below under “2019 Leadership Changes” and “2020 Leadership Changes.”

Executive Summary

 

Principal Components of Named Executive Officer Total Target Compensation in 2019

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Performance Measures Driving 2019 Compensation

 

 

 

Applicable to

 

 

 

2019 Target

 

 

 

2019 Actual

 

  2017-2019 Target

 

 

 

2017-2019 Actual

 

Free Cash Flow*

 

 

Annual Incentive

 

  $15.0B   -$4.3B   $26.5B   $20.9B
 

Performance Awards

(3 year performance period)

 

Revenue*

 

 

Annual Incentive

 

  $111.0B   $76.6B   $293.8B   $271.1B
 

 

Performance Awards

(3 year performance period)

 

Core Earnings Per Share*

 

 

Annual Incentive

 

  $20.10   -$3.47   $34.95   $24.58
 

 

Performance Awards

(3 year performance period)

 

 Total Shareholder 

Return

 

 

PBRSUs

(3 year performance period)

 

n/a

 

  n/a   51st to  60th percentile
(against peers)
  90th percentile (ranked #3 of 22)
*

As discussed below, the Compensation Committee has discretion to adjust performance metrics to better reflect the Company’s core performance. No adjustments were made to the 2019 annual or 2017-2019 long-term performance metrics. Free cash flow and core EPS are defined on page 40.

 

2019 Annual Incentive Award
Payout

 

  2017-2019 Performance Award
Payout
 

2017-2019 PBRSU

Payout

0%   0%   175%

Opportunities for Shareholder Feedback on Executive Compensation

The Board and the Compensation Committee have a long-standing practice of encouraging shareholder feedback, and executive compensation remains a key focus area in our year-round discussions with shareholders. During 2019, we engaged more frequently and directly with our shareholders to discuss our pay for performance philosophy, alignment with stakeholder interests, and opportunities for enhancing the core features of our program. We also discussed the Compensation Committee’s decisions connected to the recent leadership changes. Recent changes made to our compensation practices and policies include enhancing our clawback policy to cover incentive compensation paid to executives who are found to have violated, or engaged in negligent conduct in connection with the supervision of someone who violated, any Company policy, law, or regulation that has compromised the safety of the Company’s products or services and has (or could reasonably be expected to have) a material adverse effect on the Company, our customers, or the public. Shareholders have generally been supportive of past enhancements to our executive compensation program, including the introduction of three performance metrics that pay executive officers based on our performance and how well we deliver shareholder value relative to our peers, and more stringent stock holding periods. Many shareholders also asked the Compensation Committee to consider additional means by which executives’ pay can be impacted by the Company’s performance with respect to safety. Additional information on our shareholder engagement program is set forth under “Shareholder Outreach” on page 19.

In 2019, our executive compensation program received 92% approval from our shareholders. The Compensation Committee will continue to consider say-on-pay vote results and feedback from shareholders when reviewing our executive compensation programs and practices.

2019 Leadership Changes

Mr. Muilenburg ceased to serve as President and Chief Executive Officer of the Company on December 22, 2019. He was not entitled to any severance or separation payments in connection with his retirement. Under the pre-existing terms of the Company’s plans, Mr. Muilenburg vested in pro-rated portions of previously granted long-term incentive awards based on the number of months he was employed during the applicable vesting or performance period. He also fully vested in certain additional stock unit awards earned prior to his service as President and CEO.

In connection with Mr. Muilenburg’s departure, Mr. Smith was appointed as interim President and Chief Executive Officer. Mr. Smith did not receive any additional compensation with respect to this role.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Mr. McAllister ceased to serve as Executive Vice President, President and Chief Executive Officer of Commercial Airplanes in October 2019, and terminated employment with the Company on December 31, 2019. In connection with his termination, Mr. McAllister forfeited 100,000 unvested restricted stock units that were granted in connection with his hire in 2016, as well as all unvested RSUs he had received pursuant to our long-term incentive program. Mr. McAllister received a lump sum payment of $14.75 million from the Company, which approximated the value of a pension benefit that Mr. McAllister forfeited when he left a former employer. Mr. McAllister received no other compensation from the Company in connection with his separation.

In connection with Mr. McAllister’s departure, Mr. Deal was appointed as Executive Vice President, President and Chief Executive Officer, Commercial Airplanes. In connection with that appointment, his annual base salary rate, annual incentive target, and long-term incentive target were increased.

2020 Leadership Changes

Mr. Luttig ceased to serve as Executive Vice President, Counselor and Senior Advisor to the Board effective January 1, 2020, and retired from the Company effective March 9, 2020. Under the pre-existing terms of the Company’s plans, Mr. Luttig vested in pro-rated portions of previously granted long-term incentive awards based on the number of months he was employed during the applicable vesting or performance period. Additional detail is provided under “Potential Payments Upon Termination” on page 60, as well as in the footnotes to the executive compensation tables below.

As disclosed in Current Reports on Form 8-K filed with the SEC on December 23, 2019 and January 10, 2020, Mr. Calhoun was appointed as President and Chief Executive Officer of the Company effective January 13, 2020. The terms of Mr. Calhoun’s compensation as set forth below were determined by the independent directors and the Compensation Committee in consultation with the Compensation Committee’s compensation consultant, Pay Governance, and were benchmarked against market practices with respect to the compensation of chief executive officers at comparable companies with leadership transitions. Mr. Calhoun receives a base salary at an annual rate of $1,400,000. In addition, Mr. Calhoun is eligible to receive an annual incentive award with a target value of 180% of base salary, which for 2020 only will pay out at no less than target, and a long-term incentive award with a target value of 500% of base salary.

Mr. Calhoun also received two additional long-term incentive awards in connection with his hire. The first is an award of restricted stock units with a grant date value of $10,000,000, which was designed to compensate Mr. Calhoun for amounts forfeited upon his departure from his prior employer. This award will vest in three equal installments over a three-year period contingent on Mr. Calhoun’s continued employment through the applicable vesting dates. The second is an award of performance-based restricted stock units with a grant date value of $7,015,000. This award is scheduled to vest, at the earliest, 50% after two years of service as CEO and 50% after three years of service as CEO. However, in no event will either installment of PBRSUs vest unless and until the Compensation Committee certifies that the performance goals set forth below have been substantially achieved. If Mr. Calhoun terminates employment prior to the award vesting for any reason other than death or disability, any unvested PBRSUs as of that date will be forfeited. If the performance goals have not been substantially achieved by December 31, 2023, the award will be forfeited in its entirety. The performance goals are:

 

 

the safe return to service of the 737 MAX (including regulatory clearance, ungrounding of previously delivered aircraft, and delivery of aircraft manufactured during the grounding),

 

 

successful engineering realignment in accordance with the recommendations of the Board’s Committee on Airplane Policies and Processes,

 

 

successful entry into service of the 777X and ramp-up of aircraft production and delivery,

 

 

a successful crewed flight of the Starliner spacecraft,

 

 

achievement of specific milestones for the T-7A, MQ-25, and VC-25B programs and KC-46 production stabilization,

 

 

successful execution of the Board’s long-range business plan objectives for Boeing Global Services established in 2020, and

 

 

achievement of closing and post-closing milestones under our joint ventures with Embraer (assuming regulatory approvals are obtained).

Mr. Calhoun’s 2020 target compensation reflects the Company’s strong commitment to performance-based compensation, with approximately 86% of his target compensation at risk.

 

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Program Objectives

 

 

Pay for Performance
  Each element of our executives’ compensation is designed to align with our long-term business strategy and drive sustainable operating and financial results.
  100% of annual and 75% of long-term incentive awards are tied to performance criteria.
  Our annual incentive plan pays based on Company performance against financial targets set by the Compensation Committee, as well as on individual performance.
  Our long-term incentive program awards are tied to individual performance, rigorous financial performance metrics, TSR relative to a group of peer companies set by the Compensation Committee and share price.
  Individual performance evaluations, which affect both annual incentive payouts and long-term incentive awards, incorporate safety considerations and the input of our Aerospace Safety Committee on executives’ individual performance as it may impact safety.
Attract and Retain World-Class Talent
  Compensation elements and award opportunities are designed to position us to compete effectively for engineering, business, information technology, financial, product safety, and other executive talent.
  High-performing executives may earn above-target pay when performance goals are exceeded.
  Beginning in 2019, the Aerospace Safety Committee advises the Compensation Committee with respect to senior executives’ individual performance as it may impact the safety of our products and services.
Support our Commitment to Safety
  In 2020, we expanded our clawback policy to cover instances of misconduct that compromise the safety of our products or services.
  Beginning for 2019, the Compensation Committee has strengthened its process for assessing the performance of executives with respect to safety and our other core values, including by ensuring formal consultation with the Aerospace Safety Committee in connection with individual performance reviews.
Shareholder Alignment
  Approximately 86% of NEO target compensation is linked to achievement of rigorous performance targets, TSR relative to our peers, and/or share price.
  Executive officers must own significant amounts of Boeing stock throughout the term of their employment and must hold vested stock until share ownership requirements are met.
  We do not accelerate vesting of equity awards solely in connection with a change in control.
  Executives receive 25% of their long-term incentive target in PBRSUs, which pay out based on Boeing’s TSR over a three-year period relative to peer companies.
Reduce Risk
  Our annual incentive awards, performance awards, and PBRSUs are subject to caps.
  All incentive compensation is subject to a rigorous clawback policy.
  Executive officers may not engage in pledging, hedging, or other speculative trading activity.
  The Compensation Committee and its independent consultant review our executive compensation plans and programs on at least an annual basis.
  Compensation risk considerations are discussed in additional detail on page 49.

 

 

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Program Design and Principal Elements

 

 

 

   What We Do

 

 

LOGO

 

 

Vast majority of pay is performance-based

LOGO   Challenging performance targets
LOGO   Multiple performance metrics
LOGO   Rigorous stock ownership requirements
LOGO   Robust clawback policy, enhanced in 2020 to cover instances of misconduct that compromise the safety of our products or services
LOGO   Generally target pay to peer group median
LOGO   Active engagement with shareholders
LOGO   Independent compensation consultant reports directly to Compensation Committee

 

 

   What We Don’t Do

 

 

LOGO

 

 

No accelerated vesting of equity awards solely in connection with a change in control

LOGO   No tax gross-ups, other than for certain relocation expenses
LOGO   No employment agreements (except where required by non-U.S. local law)
LOGO   No change-in-control arrangements
LOGO   No pledging or hedging of Boeing stock
LOGO   No excessive perquisites
LOGO   No performance-based incentive payouts if pre-established performance levels are not achieved
LOGO   No uncapped incentive award payouts
 

 

2019 Target Compensation

We design our executive compensation program to attract and retain the talent needed to achieve our long-term strategic objectives, reward executives who achieve those objectives, and align executives’ interests with the long-term interests of our shareholders. The Compensation Committee reviews our executive compensation program on an ongoing basis and, with the assistance of its independent compensation consultant, compares our executive compensation practices to those of our peers. Individual executive pay is generally benchmarked against the median of our peer group, but actual target pay also takes into account job requirements, the executive’s experience and performance, and the evolving needs of the business.

The table below sets forth our 2019 NEOs, with their target compensation elements and target total compensation based on their base salary as of December 31, 2019 (or, for Messrs. Muilenburg and McAllister, as of their respective separation dates). In each case, target amounts are those amounts that would have been earned had the Company and the executive achieved target performance levels set by the Compensation Committee; however, actual target values may differ from the amounts shown below due to changes in base salary during the year as well as through application of the individual performance score (which impacts both annual and long-term incentive awards).

 

Name

  

2019

Annualized

Base

Salary

  

2019 Target

Annual Incentive
Compensation

  

2019 Target

Long-Term

Incentive

Compensation

  

2019 Total
Annualized
Target Direct
Compensation

Dennis A. Muilenburg

 

     $

 

1,700,000

 

 

      

 

$3,060,000

(180% of base salary)

 

 

 

 

      

 

$13,175,000

(775% of base salary)

 

 

 

 

     $

 

17,935,000

 

 

Gregory D. Smith

 

     $

 

1,150,000

 

 

      

 

$1,322,500

(115% of base salary)

 

 

 

 

      

 

$  4,887,500

(425% of base salary)

 

 

 

 

     $

 

7,360,000

 

 

Stanley A. Deal

 

     $

 

1,000,000

 

 

      

 

$1,100,000

(110% of base salary)

 

 

 

 

      

 

$  4,100,000

(410% of base salary)

 

 

 

 

     $

 

6,200,000

 

 

Timothy J. Keating

 

     $

 

700,000

 

 

      

 

$   665,000

(95% of base salary)

 

 

 

 

      

 

$  2,625,000

(375% of base salary)

 

 

 

 

     $

 

3,990,000

 

 

J. Michael Luttig

 

     $

 

989,000

 

 

      

 

$1,087,900

(110% of base salary)

 

 

 

 

      

 

$  3,956,000

(400% of base salary)

 

 

 

 

     $

 

6,032,900

 

 

Kevin G. McAllister

 

     $ 1,110,000       

 

$1,221,000

(110% of base salary)

 

 

 

 

      

 

$  4,440,000

(400% of base salary)

 

 

 

 

     $

 

6,771,000

 

 

For 2019, no annual incentive awards were paid to any NEOs, and payouts under our 2019 long-term incentive program (for the 2019-2021 performance period) are expected to be significantly negatively impacted by our performance during 2019.

 

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Mix of Pay

Approximately 86% of our NEOs’ target compensation is variable based on Company and individual performance. Variable compensation consists of the target annual incentive and the target value of performance awards, PBRSUs and RSUs.

Base Salary

Base salaries are designed to provide a fixed level of cash compensation for each executive based on competitive market data and individual factors such as competencies, skills, experience, contributions, performance, and the assumption of new responsibilities or promotions. There are no specific weightings assigned to these individual factors. When setting base salaries, the Compensation Committee and the Board also consider the impact of base salary on other compensation elements, such as the size of target incentive awards.

Principal Components of Variable Compensation in 2019

 

LOGO

All annual incentive payouts and long-term incentive awards are impacted by individual performance, including—beginning in 2019—formal consultation with the Aerospace Safety Committee to ensure that individual performance scores reflect achievement of safety and quality-related objectives.

Annual Incentive Plan

 

 

Features of Annual Incentive Plan

 

   

Awards are payable in cash

 

   

Payout based on Company and individual performance

 

   

Company performance metrics: 50% Free Cash Flow, 25% Core EPS, 25% Revenue

The annual incentive plan is designed to drive near-term program execution, operational excellence, and sustainable growth, as well as to differentiate executives based on individual performance. The Compensation Committee assigns each executive a target incentive award, determined as a percentage of base salary, based on competitive market data and the executive’s pay grade, responsibilities and role. Adjustments to annual incentive targets are generally approved by the Compensation Committee in February for the applicable year, although additional adjustments may occur at other times of the year.

Actual incentive awards in 2019 were determined as follows:

 

Target Annual
Incentive Award

(% of Base Salary)

   X     

Company

Performance Score

(0—200%)

   X      

Individual

Performance Score

(0—200%)

   =     

 

Final Annual

Incentive Award

(Capped at 200% of Target)

 

The CEO’s individual performance score is generally determined by the Compensation and GON Committees and reviewed with the other independent directors of the Board (Mr. Muilenburg did not receive an individual performance score for 2019). The CEO presents the Compensation Committee with recommendations for individual performance scores for each of the other executive officers, including the other NEOs (Mr. McAllister did not receive an individual

 

 

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performance score for 2019). The Compensation Committee reviews the CEO’s recommendations, makes such adjustments as it deems appropriate, and approves the individual performance scores. Individual performance scores reflect the Compensation Committee’s assessment of each executive’s business achievements, contributions, and overall organization performance, including performance with respect to key leadership behaviors. The Aerospace Safety Committee also has a role in determining individual performance scores, as that committee provides input to the Compensation Committee with respect to senior executives’ individual performance as it may impact safety of our products and services. The Company performance score is determined based on the performance metrics described on page 40 under “Company Performance Metrics for 2019 Incentive Plans.”

Long-Term Incentive Program

 

Features of Long-Term Incentive Program

 

   

Performance awards (50%, payable in cash or stock based on Company financial performance)

 

   

Performance-based restricted stock units (25%, payout based on three-year relative TSR)

 

   

Restricted stock units (25%, vest three years after issuance)

 

   

Initial award values subject to individual performance

The long-term incentive program, which provides a mix of equity and cash-settled awards, is designed to drive achievement of long-term operational and financial goals and increased shareholder value, as well as to encourage retention of key talent over a sustained time period. Long-term incentive targets are set as a fixed percentage of base salary. Adjustments to long-term incentive targets are generally approved by the Compensation Committee in February, although additional adjustments may occur at other times of the year. Long-term incentive award targets are also impacted by individual performance, as the initial value of awards may be increased or decreased based on each executive’s individual performance score for the prior year. The Compensation Committee recently adopted this practice in order to drive further connection between pay and individual performance, as well as to enable executives to remain incentivized even during periods (such as 2019) when the Company performance score results in low payouts.

Performance Awards. Performance awards reward executives to the extent that the Company meets or exceeds the Company’s performance goals for the relevant three-year performance period. The Compensation Committee sets performance targets at the beginning of each period based on the Company’s long-range business plan. Performance awards are denominated in units, each with a target (initial) value of $100. Final payouts in respect of the 2019-2021 performance period may range from 0% to 200% of initial award value. Performance awards are designed to pay 100% of the initial award value at the end of the three-year performance cycle if performance goals are achieved at target. Payment, if earned, is made in cash, stock, or a combination of both, at the Compensation Committee’s discretion. Performance awards in respect of the 2019-2021 performance period pay out based 50% on free cash flow, 25% on revenue, and 25% on core EPS, in each case over a three-year performance period, as described on page 40 under “Company Performance Metrics for 2019 Incentive Plans.”

Performance-Based Restricted Stock Units. PBRSUs are designed to align our executives’ interests with those of our shareholders by tying award payout levels to TSR performance as compared to the companies against which we compete for customers, capital, and/or executive talent. For information on our benchmarking peer group, see “Benchmarking Against Our Peer Group” on page 47. PBRSUs pay out in shares of Boeing stock based on Boeing’s TSR over a three-year period (beginning and ending in February) relative to those peer companies. TSR performance at less than the 21st percentile results in a 0% payout, with payouts increasing at 25% increments up to a maximum of 200% for performance exceeding the 91st percentile. PBRSUs will be paid at target for TSR performance between the 51st and 60th percentile (the same target level as under our PBRSU awards for the 2017-2019 performance period). Under the terms of the awards, peer companies may be subject to removal if, for example, they cease to trade on a public exchange.

Restricted Stock Units. RSUs are designed to encourage executive retention and reward continued and sustained performance. The ultimate value realized upon vesting (three years after the grant date) is based on the stock price, driving increased focus on sustainable business performance. RSUs also facilitate significant long-term stock ownership by our executives.

Supplemental Equity Awards

From time to time the Compensation Committee may grant equity awards to executives to attract and retain high-performing leaders, reward exceptional performance, or recognize expanded responsibility. These equity awards have vesting and other provisions designed to promote retention of the services and skills of the recipient. For example, these awards generally do not vest until three to four years after the grant date and are forfeited in full if the executive resigns, retires, or is terminated for cause prior to vesting.

 

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Company Performance Metrics for 2019 Incentive Plans

Free Cash Flow, Core Earnings Per Share, and Revenue

Each year, the Compensation Committee sets one- and three-year financial goals for our annual and long-term compensation programs based on our long-range business plan. These goals incorporate expectations regarding the probability of achieving performance goals, key risks, and a degree of “stretch” to push our executives to achieve superior performance. When setting performance goals, the Compensation Committee seeks to ensure that the target payout is achievable if the Company executes according to its long-range business plan during the applicable period. It is expected that both maximum performance and performance resulting in zero payout would be infrequent. Following each performance period, the Compensation Committee evaluates our performance and approves final awards.

For 2019, our annual incentive plan measured Company performance using a combination of free cash flow, revenue, and core earnings per share. The performance award portion of our 2019 long-term incentive program will also measure performance based on these metrics over the three-year performance period. We use these metrics, together with assessments of individual performance, to drive the linkage between business objectives and improved and sustained performance as shown below.

 

 

2019 Performance
Metrics

 

 

 

Free Cash Flow(1)

 

 

 

 

Revenue

 

 

 

 

Core Earnings Per Share(2)

 

 

 

Weighting

 

 

 

 

50%

 

 

 

 

25%

 

 

 

 

25%

 

 

Drivers

 

• Business execution

• First-time quality and safety

• On-time delivery

• Disciplined asset, inventory, and cash management

• Disciplined investments in productivity and innovation

 

• Business execution

• First-time quality and safety

• On-time delivery

• New orders

 

• Business execution

• First-time quality and safety

• On-time delivery

• Continued innovation

• Operating cost management and achievement of productivity targets

 

(1)

Free Cash Flow is defined as GAAP operating cash flow, less capital expenditures for property, plant, and equipment additions.

(2)

Core Earnings per Share is defined as GAAP diluted earnings per share, excluding the net impact of unallocated pension and other postretirement benefit expense.

The Compensation Committee determined that these performance metrics would sharpen executives’ focus on the elements of operational and financial performance that we believe best drive long-term shareholder value. Our broad-based, non-executive incentive programs also used these metrics for 2019, so that all employees were aligned in pursuit of the same goals. We believe that these metrics drove accountability and performance and enabled employees at every level to maintain a stronger and more direct line of sight to operational and financial performance.

To better reflect the core operating performance of the Company, the Compensation Committee retained discretion to adjust one or more of these metrics to account for (1) significant external events outside management’s control, such as tax or regulatory changes, (2) management decisions intended to increase long-term value but that create short-term financial impacts, such as major acquisitions or dispositions or unplanned share repurchases, and (3) significant changes to market conditions that were not foreseeable at the outset of a performance period. References to these metrics in this proxy statement mean such metrics as adjusted to account for such items. None of these metrics was adjusted for 2019 (or the 2017-2019 performance period, which utilized the same metrics for performance awards granted in 2017).

Because of the long product cycles in our business, the Compensation Committee believes that the one-year and three-year versions of these metrics created differentiated yet complementary incentives for our employees. In some cases, these drivers have enhanced significance for either one-year or three-year performance. For example, as commercial airplanes are often delivered one or more years after they are ordered, new orders tend to have a more significant impact on revenue in the context of the three-year performance periods. The table below outlines some of the key drivers impacting our operational and financial performance on a one- and three-year basis, and underscores the reasons why the 737 MAX grounding and our inability to deliver aircraft to our customers during the grounding has had a significant impact on our annual and long-term financial results.

 

 

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Principal Drivers of One-Year Performance

 

     

 

Principal Drivers of Three-Year Performance

 

•   Business execution

•   First-time quality and safety

•   On-time delivery

•   Operating cost management

•   Disciplined asset, inventory and cash management

•   Achievement of annual productivity targets

•   Strong services order capture

   

•   Efficient use of long-term assets

•   Technology innovation

•   First-time quality and safety

•   Sustained productivity

•   Long-term risk reduction

•   New orders with favorable terms

•   Business model enhancements

Total Shareholder Return Relative to Peer Companies

The long-term incentive program also includes PBRSUs, which are paid in shares of stock after a three-year performance period and are earned based on Boeing’s TSR relative to a group of peer companies determined by the Compensation Committee. For peer group information, see “Benchmarking Against Our Peer Group” on page 47.

2019 Compensation Decisions and Results

Base Salary

In February 2019, the Compensation Committee approved increases to the base salaries of the following NEOs: Mr. Smith’s from $1,040,000 to $1,150,000; Mr. Deal’s from $825,000 to $950,000, Mr. Keating’s from $675,000 to $700,000, Mr. Luttig’s from $965,000 to $989,000, and Mr. McAllister’s from $1,050,000 to $1,110,000. These adjustments were made based on the Compensation Committee’s review of market practices for comparable executive roles within our peer group and its evaluation of each NEO’s individual performance and contributions. In November 2019, the Compensation Committee increased Mr. Deal’s base salary to $1,000,000 in connection with his move from Global Services to Commercial Airplanes. Mr. Muilenburg’s base salary was not adjusted during 2019.

Annual Incentive Plan Award Targets

In February 2019, the Compensation Committee approved increases to the annual incentive targets for the following NEOs: Mr. Muilenburg’s from 175% to 180% of his base salary, Mr. Smith’s from 110% to 115% of his base salary, Mr. Deal’s from 100% to 105% of his base salary, and Mr. Keating’s from 90% to 95% of his base salary. These adjustments were made based on the Compensation Committee’s review of market practices for comparable executive roles within our peer group and its evaluation of each NEO’s individual performance and contributions. In November 2019, the Compensation Committee increased Mr. Deal’s annual incentive target from 105% to 110% in connection with his move from Global Services to Commercial Airplanes. The annual incentive targets for Messrs. Luttig and McAllister were not adjusted in 2019. As discussed below, no annual incentive awards were paid for 2019 performance.

2019 Annual Incentive Assessment

The Company performance score was determined by comparing the Company’s free cash flow, revenue, and core EPS to targets set at the beginning of the year by the Compensation Committee, with free cash flow weighted at 50% and the other two metrics weighted at 25% each. Actual performance that was higher or lower than target for any particular metric was assigned a percentage score from 0% to 200% based on a curve established by the Compensation Committee. 2019 Company performance with respect to each metric, and the resulting Company performance score, is set forth below:

 

         

 

Metric

  

 

Weighting

  

 

Target

  

 

Result

    

Company

Performance
Score

Free Cash Flow

   50%    $15.0B    -$4.3B      0%

Revenue

   25%    $111.0B    $76.6B

Core EPS

   25%    $20.10    -$3.47

The performance set forth above resulted in no payouts for 2019, which we believe is an appropriate outcome in light of our commitment to pay for performance. The Compensation Committee made no adjustments to the performance measures above.

In 2019, individual performance scores for the NEOs ranged from 95% to 107%, averaging 102%. Messrs. Smith and Deal both received scores over 100%. Messrs. Muilenburg and McAllister did not receive individual performance

 

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scores for 2019 in connection with their separations from the Company in 2019 (like the other NEOs, they did not receive any annual incentive award for 2019). The performance scores were primarily the result of each executive’s financial, operational, and business achievements, as well as their progress on key initiatives, leadership strength, and overall contributions to the Company during 2019. Since the Company performance score was 0% and no annual incentives were earned or paid, the NEO’s 2019 individual performance scores did not have any impact on 2019 compensation. However, these individual performance scores were used to determine long-term incentive awards granted in 2020 for the 2020-2022 performance period. The individual performance scores reflect the following:

 

 

Mr. Smith’s leadership during a period of uncertainty in the areas of enterprise strategy, business operations, and managing financial risk and ensuring liquidity.

 

 

Mr. Deal’s strong performance as President and CEO of Boeing Global Services, leading to his selection to succeed Mr. McAllister as the leader for Boeing Commercial Airplanes in late 2019.

 

 

Mr. Keating’s leadership of efforts to practice transparent partnership with multiple U.S. and international government agencies and global regulatory bodies.

 

 

Mr. Luttig’s counsel to the Board and CEO as Senior Advisor after transitioning from the Executive Vice President and General Counsel role in mid-2019.

Long-Term Incentive Program Award Targets

In February 2019, the Compensation Committee approved increases to the long-term incentive targets for the following NEOs: Mr. Muilenburg’s 750% to 775%, Mr. Deal’s from 375% to 400%, Mr. Keating’s from 350% to 375%, and Mr. McAllister’s from 400% to 410%. These adjustments were made based on the Compensation Committee’s review of market practices for comparable executive roles within our peer group and its evaluation of each NEO’s individual performance and contributions. In November 2019, the Compensation Committee increased Mr. Deal’s long-term incentive target from 400% to 410% in connection with his move from Global Services to Commercial Airplanes. The long-term incentive targets for Messrs. Smith and Luttig were not adjusted in 2019. Messrs. Muilenburg and Luttig forfeited a portion of their 2019 long-term incentive awards in connection with their respective retirements, and Mr. McAllister forfeited all of his 2019 long-term incentive awards in connection with his separation.

2017-2019 Performance Award Assessment

For the 2017-2019 performance awards, performance was measured based 50% on free cash flow, 25% on revenue, and 25% on core EPS over the three-year performance period. Actual performance that was higher or lower than target for any particular metric was assigned a percentage score from 0% to 200% based on a curve established by the Compensation Committee. Company performance with respect to each metric for the three-year performance period, and the resulting Company performance score is set forth below.

 

         
Metric    Weighting    Target    Result     

Company

Performance
Score

Free Cash Flow

   50%    $26.5B    $20.9B      0%

Revenue

   25%    $293.8B    $271.1B

Core EPS

   25%    $34.95    $24.58

The performance set forth above resulted in no payouts for the 2017-2019 period, which we believe is an appropriate outcome in light of our commitment to pay for performance. The Compensation Committee made no adjustments to the performance measures above.

2017-2019 Performance-Based Restricted Stock Units Assessment

Boeing’s relative TSR rank was third out of 22 companies, placing us at the 90th percentile of our peer group for the 2017-2019 performance cycle. Based on these metrics, the PBRSUs paid out at 175% of target.

Supplemental Equity Awards

In February 2019, the Compensation Committee approved a supplemental grant of 4,000 RSUs for Mr. Keating in recognition of strong performance and as a means of retention. This award will vest in full three years following the grant date and will be forfeited if Mr. Keating resigns, retires, or is terminated for cause prior to the vesting date.

2020 Changes to our Program Design

In early 2020, we made several changes to our executive compensation program design. These changes are designed to reflect the current challenges to our business and feedback provided by shareholders over the last year.

 

 

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First, we updated our clawback policy to provide that all incentive pay is subject to clawback or forfeiture if an executive violates, or engages in negligent conduct in connection with the supervision of someone who violated, any Company policy, law, or regulation that has compromised the safety of the Company’s products or services and has (or could reasonably be expected to have) a material adverse effect on the Company, our customers, or the public. To complement this change, we amended our incentive plans to strengthen our ability to enforce the clawback policy globally.

Second, in accordance with our standard practice, the Compensation Committee has set one- and three-year performance goals for our 2020 annual incentive plan and the performance award portion of our 2020 long-term incentive program; however, the performance metrics used will differ from in previous years. These changes have no impact on 2019 compensation or on any awards granted prior to 2020.

2020 Annual Incentive Plan

For 2020, payouts under our annual incentive plan will continue to be based on Company and individual performance. However, payouts will be calculated differently than in 2019, as described below.

 

    

2019

 

 

 

2020

 

 

 

 

 

Rationale for Change

 

 

 

Performance

metrics and

weightings

  

 

100% based on Company performance score:

 

•  Free cash flow (50%)

•  Revenue (25%)

•  Core EPS (25%)

 

 

50% based on Boeing performance score and 50% based on business unit score

 

Boeing performance score based on free cash flow (75%) and core EPS (25%).

 

Business unit performance score based on

 

•  Commercial Airplanes: free cash flow (75%) and operating earnings (25%)

•  Defense, Space & Security and Global Services: free cash flow (50%), operating earnings (25%), and revenue (25%)

 

For executives who are not dedicated to one business unit, the business unit score will be the average of the three business unit scores

 

 

Enhances focus on free cash flow, both at the Company level and the Commercial Airplanes business unit level, to ensure that management is highly focused on executing our business plan, with particular emphasis on managing our liquidity and overall financial health as we safely return the 737 MAX to service

     

Threshold

performance

score (by metric)

   N/A (performance score for any metric could range from 0% to 200%)  

50% (performance below 50% for any metric will result in a 0% score for that metric)

 

If the Boeing performance score is below threshold for both metrics, the business unit performance scores will also be reduced to below threshold (resulting in no payout)

 

 

Reflects commitment to pay for performance philosophy and responsible pay practices, in a year where significant uncertainty has resulted in broader-than-usual performance ranges between threshold and target, and between target and maximum performance

 

Target

performance

score (by metric)

   100%   No change
     

Maximum

performance

score (by metric)

   200%   150%    
     

Individual

performance

score range

   0% to 200%   No change   N/A
     

Payout range

 

  

0% to 200% of individual target award

 

 

 

No change (although Boeing/business unit score results in  maximum 150% payout at 100% individual performance level)

 

 

 

N/A

 

 

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2020 performance goals incorporate the ongoing financial and operational impacts related to the 737 MAX grounding and assume that 737 MAX return to service begins in 2020. Because of the significant uncertainty regarding when we will resume 737 MAX deliveries, including many factors outside of our control, the Compensation Committee established a range of targets for each Boeing and Commercial Airplanes performance metric. The actual target that will be used for purposes of these metrics will depend on when 737 MAX deliveries resume.

Our broad-based, non-executive annual incentive programs will also use this structure for 2020 so that our employees are aligned in pursuit of the same goals. As described above under “2020 Leadership Changes,” our CEO’s 2020 annual incentive award payout is guaranteed to be no less than his individual target award.

2020-2022 Performance Awards

The 2020-2022 performance award component of our long-term incentive program will continue to be based on performance across the same three financial metrics as used in prior years. However, similar to our 2020 annual incentive plan structure, we have made the structural changes set forth below.

 

   

 

2019-2021 Performance Period

 

 

 

2020-2022 Performance Period

 

 

 

Rationale for Change

 

 

 

     

 

Performance

metrics and

weightings

 

 

100% based on Company performance:

 

•  Free cash flow (50%)

•  Revenue (25%)

•  Core EPS (25%)

 

 

 

No change

 

 

N/A

     

 

Threshold

performance

score (by metric)

 

 

N/A (performance score for any metric could  range from 0% to 200%)

 

 

50% (performance below 50% for any metric will result in a 0% score for that metric)

 

 

Reflects commitment to pay for performance philosophy and responsible pay practices, in a year where significant uncertainty has resulted in broader-than-usual performance ranges between threshold and target, and between target and maximum performance.

 

 

 

Target

performance

score (by metric)

 

 

 

 

100%

 

 

 

No change

 

 

Maximum

performance

score (by metric)

 

 

 

 

200%

 

 

 

150%

 

 

 

Payout range

 

 

 

 

0% to 200% of target performance award

 

 

 

 

 

 

0% to 150% of target performance award

 

Due to uncertainty with respect to when we expect to resume 737 MAX deliveries, including many factors outside of our control, the Compensation Committee established a range of targets for each performance metric. The actual target that will be used for purpose of these metrics will depend on when 737 MAX deliveries resume.

2020 Individual Performance Scoring

Awards under our annual incentive plan and under our long-term incentive program will continue to be directly impacted by each executive’s individual performance score as described under “Mix of Pay” beginning on page 38. As was the case in 2019, individual performance scores in 2020 and beyond will include formal consideration of performance against safety-related objectives and will reflect the input of the Aerospace Safety Committee.

Other Design Elements

 

As part of a comprehensive and competitive executive compensation package, executives may be eligible for additional benefits as summarized below. These benefits are designed to attract and retain the executive talent needed to achieve our business and financial objectives.

Retirement Benefits

Our executives participate in our Voluntary Investment Plan, or VIP, a broad-based, tax-qualified defined contribution 401(k) retirement plan. During 2019, they were also eligible to participate in our Executive Supplemental Savings Plan,

 

 

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or Executive SSP, a nonqualified deferred contribution plan. The Executive SSP provides certain executives with additional retirement benefits and allows eligible participants to receive Company contributions that would otherwise exceed Internal Revenue Code limits applicable to the VIP. Effective January 1, 2020, we eliminated the DC SERP contribution (a supplemental Company contribution determined as a certain percentage of base salary and annual incentive compensation) under the Executive SSP for all executive officers. The Executive SSP also allows executives to voluntarily defer, on a nonqualified basis, receipt of a portion of salary and/or cash-based incentive payouts. For more information on our nonqualified deferred compensation benefits, see “2019 Nonqualified Deferred Compensation” beginning on page 58.

Executives hired prior to 2009 earned benefits under our Pension Value Plan, or PVP, a broad-based defined benefit pension plan, until the end of 2015, and if they had a PVP benefit or were hired prior to 2008, also earned benefits under our defined benefit Supplemental Executive Retirement Plan, or DB SERP, until the end of 2015. In addition, Mr. Smith has accrued benefits pursuant to a Canadian subsidiary pension in connection with his prior service with the Company, and Mr. Luttig accrued a supplemental pension benefit in connection with an arrangement entered into when he joined Boeing in 2006 (this benefit was fully paid out in 2019 upon his attainment of age 65). Each of these arrangements, as well as each of our broad-based pension plans for which executives are eligible, is described under “2019 Pension Benefits” beginning on page 56.

Perquisites and Other Executive Benefits

Consistent with our executive compensation philosophy and our commitment to emphasize performance-based pay, we limit the perquisites and other benefits that we provide to executives, and any such benefits are provided to help achieve our business objectives. In 2019, these perquisites consisted of:

 

 

Security—Our CEO is required, and certain senior executives are encouraged, to use Company aircraft for business and personal travel for security reasons. We provide ground transportation services to the CEO so that he may conduct business during his commute and for security purposes. In addition, home security is provided to certain senior executives.

 

 

Productivity—Relocation assistance (when applicable) and tax preparation and planning services.

 

 

Health—Annual physical exam.

 

 

Other—Supplemental life insurance, Company contributions to retirement plans, charitable gift matching program, commemorative gifts, and certain ground transportation services.

No tax gross-ups are provided except in connection with certain relocation expenses. The Compensation Committee annually reviews perquisites and other executive benefits to ensure that they are reasonable and consistent with our executive compensation philosophy.

Severance Benefits

No NEO received any benefits under the Executive Layoff Benefit Plan in 2019. We maintain an Executive Layoff Benefit Plan to provide a separation package for executives who are involuntarily laid off due to a job elimination and who neither become employed elsewhere within the Company nor refuse any offer of employment with the Company as an executive. The plan provides a layoff benefit equal to one year of base salary plus an amount equal to the executive’s target annual incentive multiplied by the Company performance score for the year in which the layoff occurs, less any amounts paid pursuant to an individual employment, separation, or severance agreement (if applicable). The plan does not provide enhanced change-in-control benefits or tax gross-ups. The Compensation Committee believes that the benefits provided under the plan are consistent with those provided by our peers and other companies with whom we compete for executive talent. In addition to the benefits under the plan, executives may continue to participate in certain incentive award programs with respect to their outstanding awards after a separation based on service and the terms and conditions of the award.

Governance of Pay-Setting Process

 

The Company applies the following approach in setting compensation for its executive officers:

 

 

Executive officers are assigned to pay grades by comparing position-specific duties and responsibilities with market data and our internal management structure.

 

 

Each pay grade has a salary range with corresponding target annual and long-term incentive award opportunities, executive benefits, and perquisites.

 

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Salary ranges and incentive opportunities by pay grade are benchmarked annually against our peer group to ensure they are competitive.

 

 

Individual pay is benchmarked against the median of our peer group, but actual target pay also takes into account job requirements, business needs, and the executive officer’s experience, contribution, and performance.

Role of Board, Management and Consultants

The Compensation Committee establishes, reviews, and approves all elements of NEO compensation. During 2019, the Compensation Committee worked with an independent executive compensation consultant, Pay Governance, for advice and perspective regarding market trends that may affect decisions about our executive compensation program and practices. Pay Governance also advised the GON Committee in connection with nonemployee director compensation matters. Pay Governance provided no services to Boeing outside of its duties as the independent consultant to these two Board committees. The Compensation Committee has assessed the independence of Pay Governance pursuant to SEC and NYSE rules and determined that no conflict of interest exists that would prevent Pay Governance from independently representing the Compensation and GON Committees. For more information on this conflicts of interest assessment, see “Compensation Consultant” on page 29. Pay Governance is serving as the Compensation Committee’s independent consultant in 2020.

Boeing management has the responsibility for effectively implementing practices and policies approved by the Compensation Committee. Meridian Compensation Partners, LLC, or Meridian, served as management’s compensation consultant during 2019.

Additional responsibilities of the Board of Directors, Compensation Committee, management, and the compensation consultants include:

Board of Directors and Compensation Committee

 

The Compensation Committee, in coordination with the GON Committee, evaluates the performance of the CEO in light of his business goals and objectives, and reviews his performance with the other independent members of the Board. Based on this evaluation, and following consultation with the Aerospace Safety Committee, the Compensation Committee recommends the CEO’s base salary for approval by the other independent members of the Board. The Compensation Committee also reviews and approves the CEO’s annual and long-term incentive targets and payouts.

 

 

The Board reviews all components of compensation and approves all executive officer base salaries.

 

 

Based on a review of peer data, pay tally sheets (as described below), individual performance, and internal pay comparisons, the Compensation Committee determines, in the case of the CEO, and reviews and approves, in the case of other NEOs, all other elements of pay.

 

 

A supermajority (two-thirds) of the Board must approve any incentive awards that are granted to NEOs under an incentive or other compensation plan not previously approved by a supermajority of the Board. No such awards were granted in 2019.

 

 

The Compensation Committee sets incentive compensation targets based on the Company’s long-range business plan and the achievement of financial targets and related payouts for our annual and long-term incentive programs.

Management

 

 

The CEO and the Senior Vice President, Human Resources make recommendations on program design and pay levels, where appropriate, and implement the practices and policies approved by the Compensation Committee.

 

 

The CEO makes recommendations with respect to the compensation of other officers, including the other NEOs, and is assisted in pay administration by the Senior Vice President, Human Resources.

 

 

The CFO provides the financial information used by the Compensation Committee to make decisions with respect to incentive compensation goals based on achievement of financial targets and related payouts for our annual and long-term incentive programs.

 

 

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Compensation Consultants

 

 

Compensation Committee’s Independent Consultant

 

     

 

Management’s Consultant

 

•    Presents peer group pay practices and other relevant benchmarks for CEO and nonemployee director compensation to the Compensation Committee and GON Committee, respectively, as well as management.

 

•    Reviews and provides recommendations concerning management’s data and work product and compensation-related practices and proposals.

 

•    Advises the Compensation Committee Chair and the Compensation Committee with respect to management’s proposals.

 

•    Meets with the Compensation Committee in executive session following regular meetings of the Committee.

 

•    Available on as-needed basis throughout the year to consult with directors or management.

   

•    Presents peer group pay practices and other relevant compensation and performance benchmarks (except for the CEO and nonemployee directors) for the Compensation Committee and management.

 

•    Reviews and provides recommendations based on comprehensive pay tally sheets for executive officers prepared for Compensation Committee review. The pay tally sheets provide total annual compensation and accumulated wealth (value of equity holdings, outstanding long-term incentives, deferred compensation, and pension).

 

•    Provides periodic updates regarding tax, accounting, and regulatory issues that may impact executive compensation design, administration, and/or disclosure.

Benchmarking Against Our Peer Group

 

 

We benchmark executive compensation against a peer group of leading U.S.-based companies (with an emphasis on aerospace and industrial manufacturing companies) that have a technology focus, large global operations, a diversified business, and/or roughly comparable annual sales and market capitalizations. On at least an annual basis, the Compensation Committee, working with its independent consultant, reviews the composition of the peer group and determines whether any changes should be made. In 2019, Boeing’s peer group consisted of the 20 companies listed in the box to the right, which (along with General Electric) were included in the peer group used for 2018. The 2019 peer group will also be used for 2020. The median revenue of our peer group for the year ended December 31, 2019 was approximately $73 billion as compared to our revenue of $76.56 billion. As of December 31, 2019, the median market capitalization of our peer group was approximately $127 billion as compared to our market capitalization of $183.34 billion. Individual executive pay is generally targeted at the median of our peer group, but can vary based on the requirements of the job (competencies and skills), the executive’s experience, contribution, and performance, and the organizational structure of the businesses (internal alignment and pay relationships).

 

This peer group, plus Airbus, is also used to measure our relative TSR performance for purposes of our PBRSUs. For additional information on the PBRSUs, see page 39. Airbus is not included in our compensation benchmarking peer group due to the lack of publicly available and comparable compensation and benefit program information.

    Peer Companies
   
  3M
  AT&T
  Caterpillar
  Chevron
  Cisco Systems
  Exxon Mobil
  Ford
  General Dynamics
  Honeywell
  IBM
  Intel
  Johnson & Johnson
  Lockheed Martin

Microsoft

  Northrop Grumman
  Procter & Gamble
  Raytheon
  United Parcel Service
  United Technologies
  Verizon Communications

 

 

Additional Considerations

 

Executive Stock Ownership and Stock Holding Requirements

In order to further align the interests of our senior executives with the long-term interests of shareholders, we require NEOs and other senior executives to own significant amounts of Boeing stock. Senior executives are required to attain and maintain throughout their term of employment with us the following investment position in Boeing stock and stock equivalents:

 

 

CEO: 6x base salary

 

 

Executive Vice Presidents: 4x base salary

 

 

Senior Vice Presidents: 3x base salary

 

 

Vice Presidents: 1x or 2x base salary based on executive grade

 

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Senior executives must fulfill this requirement within five years after joining the executive grade to which the requirement applies. During the five-year period, executives are expected to accumulate qualifying equity until they meet the minimum stock ownership requirement. In addition, executive officers must hold all newly-vested stock until their minimum stock ownership requirement has been satisfied. Shares owned directly by the executive as well as stock units, RSUs, deferred stock units, and shares held through our savings plans are included in calculating ownership levels. Shares underlying stock options and PBRSUs do not count toward the ownership guidelines. As of December 31, 2019, each NEO employed as of that date exceeded the applicable stock ownership requirement.

Each year, the Compensation Committee reviews the ownership position of each executive officer as well as a summary covering all senior executives. In assessing stock ownership, the average daily closing stock price over a one-year period (ending September 30 of each year) is used. This approach mitigates the effect of stock price volatility and is consistent with the objective of requiring long-term, sustained stock ownership. The Compensation Committee may, at its discretion, elect at any time to pay some or all performance awards in stock, including for executives who are currently not in compliance with the applicable ownership requirement.

Granting Practices

The Compensation Committee typically grants long-term incentive awards each February. The Compensation Committee meeting date, or the next business day if the meeting falls on a day when the NYSE is closed for trading, is the effective grant date for the grants.

Executive officers who join the Company after mid-February will generally receive a pro-rated long-term incentive award, if any, for that year. Grants are pro-rated based on the time remaining in the 36-month performance or vesting period as of the date of hire. This approach aligns our program with peer practices and provide the executive with an immediate stake in Boeing’s long-term performance.

We also may grant supplemental equity awards to attract and retain high-performing leaders, reward exceptional performance, or recognize expanded responsibility. The effective date of these grants is generally based on the timing of the recognition and is set by the Compensation Committee. The exercise/grant price is the fair market value of Boeing stock on the effective date.

Securities Trading Policy

We have a policy that prohibits all employees from trading in Boeing securities while aware of material non-public information, and that further prohibits executive officers and directors from engaging in hedging, pledging, or monetization transactions (such as zero-cost collars) involving Boeing securities. This policy is described in our Corporate Governance Principles, which may be viewed in the corporate governance section of our website at www.boeing.com/company/general-info/corporate-governance.page.

Clawback Policy

We will require reimbursement of any incentive payments to a senior executive if the Board determines that the executive engaged in intentional misconduct that caused or substantially caused the need for a substantial restatement of financial results and a lower payment would have been made to the executive based on the restated financial results. This policy is described in our Corporate Governance Principles. In addition, even absent a financial restatement, the Compensation Committee may require reimbursement of incentive compensation from any executive officer (or, beginning in 2020, any other executive) who has engaged in fraud, bribery, or illegal acts like fraud or bribery, or knowingly failed to report such acts of an employee over whom such officer had direct supervisory responsibility. In 2020, the policy was enhanced to provide that the Compensation Committee may require reimbursement of incentive compensation from any executive who has violated, or engaged in negligent conduct in connection with the supervision of someone who violated, any Company policy, law, or regulation that has compromised the safety of the Company’s products or services and has (or could reasonably be expected to have) a material adverse effect on the Company. The Compensation Committee has the flexibility under this policy to direct the Company to publicly disclose any recoupment made pursuant to the policy.

In addition, The Boeing Company 2003 Incentive Stock Plan and certain other executive compensation plans provide that certain compensation payable under the plans may be forfeited or recovered in the event an award recipient engages in various types of conduct deemed detrimental to the Company’s interest, including theft or fraud against the Company and engaging in competition with the Company. In 2020, these clawback and forfeiture provisions were further revised to enhance enforceability in certain jurisdictions.

 

 

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Tax Gross-Ups

We do not provide tax gross-ups other than for certain relocation expenses, in accordance with our standard relocation policies.

Accounting and Tax Implications, Including Limitations on Deductibility of Compensation

The Compensation Committee considers the accounting and tax impact reflected in our financial statements when establishing the amount and forms of long-term and equity compensation. The forms of long-term compensation selected are intended to be cost-efficient. We account for all awards settled in equity in accordance with FASB ASC Topic 718, pursuant to which the fair value of the grant, net of estimated forfeitures, is expensed over the service/vesting period based on the number of options, shares, or units, as applicable, that vest. This includes our PBRSUs and RSUs. The estimated payout amount of performance awards, along with any changes in that estimate, is recognized over the performance period under “liability” accounting. Our ultimate expense for performance awards will equal the value earned by/paid to the executives and, accordingly, will not be determinable until the end of the three-year performance period.

Section 162(m) limits the tax deductibility of compensation paid by a public company to its CEO and certain other highly compensated executive officers to $1 million. Prior to 2018, there was an exception to the limit on deductibility for performance-based compensation that met certain requirements. The Tax Cut and Jobs Act of 2017, or TCJA, largely eliminated that exception starting in 2018. As such, compensation paid to our CEO and the other NEOs in 2018 and thereafter is presumed to be subject to the Section 162(m) deductibility limits as amended by the TCJA, with the exception of certain amounts payable pursuant to a written binding contract in effect as of November 2, 2017 that has not been materially modified thereafter (as permitted by the TCJA). Compensation granted in the past may not qualify as “performance-based compensation” under certain circumstances. We have historically retained flexibility to award compensation that is consistent with our corporate objectives even if it does not qualify for a tax deduction.

Compensation Committee Report

 

Management has prepared the Compensation Discussion and Analysis, beginning on page 33. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

 

Compensation Committee

Arthur D. Collins Jr., Chair

Edward M. Liddy

Susan C. Schwab

Mike S. Zafirovski

Mr. Calhoun and Ms. Good served on the Compensation Committee until December 23, 2019.

Compensation Committee Interlocks and Insider Participation

 

No member of the Compensation Committee during 2019 had a relationship that requires disclosure as a Compensation Committee interlock.

Compensation and Risk

 

We believe that our compensation programs create appropriate incentives to drive sustained, long-term increases in shareholder value. These programs have been designed and administered in a manner that discourages undue risk-taking by employees. Relevant features of these programs include:

 

 

Compensation Committee-approved limits on annual incentive awards, performance awards, and PBRSUs;

 

 

Compensation Committee annual and ongoing review of our compensation plans and programs as advised by the Compensation Committee’s independent compensation consultant;

 

 

Individual executive pay generally targeted at median level against comparable executive roles at an appropriate set of peer companies;

 

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Incorporation of an individual performance score for each executive as a critical factor in the annual incentive calculation, thereby enabling the Compensation Committee to direct a zero payout to any executive in any year if the executive is deemed to have sufficiently poor performance, is found to have engaged in activities or misconduct that pose a financial, operational, or other undue risk to the Company, or otherwise fails to adhere to our enduring values including safety, quality and integrity;

 

 

Incorporation of each executive’s prior-year individual performance score into the calculation of target awards under our long-term incentive program, driving further connection between pay and individual performance;

 

 

Robust clawback policies permitting the recoupment of past incentive pay from executive officers in the event of instances of misconduct, even absent a restatement of financial results, including misconduct that has compromised the safety of our products or services, and forfeiture of incentive awards and certain other compensation in the event the executive engages in various types of conduct deemed detrimental to the Company’s interests, including theft or fraud against the Company and engaging in competition with the Company;

 

 

With each increase in executive pay level, a proportionately greater award opportunity is derived from the long-term incentive program, reflecting more senior executives’ enhanced responsibility to drive long-term Company performance;

 

 

No employment agreements with executive officers (except where required by non-U.S. local law);

 

 

The use of free cash flow, revenue, and core EPS as performance metrics, which sharpens executives’ focus on the elements of operational and financial performance that the Compensation Committee believes best drive long-term shareholder value;

 

 

Use of three distinct long-term incentive vehicles that vest after three years, providing strong incentives for sustained operational and financial performance;

 

 

A long-term incentive program that has overlapping performance periods, such that at any one time three separate and distinct potential long-term awards are affected by current year performance, thereby requiring sustained and enduring high levels of performance year over year to achieve a payout;

 

 

Significant share ownership requirements for senior executives, and a holding requirement for certain senior executives, each monitored by the Compensation Committee, to ensure alignment with shareholder interests over the long term;

 

 

Limited Compensation Committee discretion to adjust performance metrics to reflect certain extraordinary circumstances affecting the core operating performance of the Company; and

 

 

Restrictions on trading in Boeing stock to reduce insider trading compliance risk, as well as prohibitions on pledging and hedging Boeing stock.

In light of these features, we conclude that the risks arising from our executive and employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

 

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COMPENSATION OF EXECUTIVE OFFICERS

Summary Compensation Table

 

The following table sets forth information regarding compensation for each of our 2019 named executive officers.

 

  Name and

  Principal Position

  Year  

Salary

($)(1)

  Stock
Awards
($)(2)
  Non-Equity
Incentive Plan
Compensation
($)(3)
 

Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings ($)(4)

  All Other
Compensation
($)(5)
 

Total

($)

  Dennis A. Muilenburg

      2019       2,013,846       7,246,100 (6)              2,790,155       2,200,094       14,250,195

  Former President and

  Chief Executive Officer

     

2018

2017


     

1,700,000

1,690,769


     

7,330,916

5,775,049


     

13,076,350

8,450,270


     


1,549,137


     

1,284,921

985,191


     

23,392,187

18,450,416


  Gregory D. Smith

      2019       1,128,846       2,430,699             411,242       545,016       4,515,803

  Chief Financial Officer and

  Executive Vice President,

  Enterprise Performance and Strategy;

  Former Interim President and

  Chief Executive Officer

     

2018

2017


     

1,032,462

974,308


     

2,550,173

11,779,769


     

4,574,957

3,782,592


     


241,461


     

524,466

447,484


     

8,682,058

17,225,614


  Stanley A. Deal

      2019       934,423       1,732,642             830,045       708,196       4,205,306

  Executive Vice President,

  President and Chief Executive Officer,

  Commercial Airplanes

     

2018

2017


     

793,904

658,154


     

1,299,478

5,605,346


     

2,072,832

1,783,236


     


457,084


     

339,332

1,310,358


     

4,505,546

9,814,178


  Timothy J. Keating

      2019       695,192       3,016,610             322,739       335,843       4,370,384

  Executive Vice President,

  Government Operations

                           

  J. Michael Luttig

      2019       984,385       1,930,360 (7)              3,841,126       549,048       7,304,919

  Former Executive Vice President,

  Counselor and Advisor to the Board of

  Directors

 

     

 

2018

2017

 


 

     

 

959,346

930,385

 


 

     

 

1,907,572

1,819,983

 


 

     

 

4,325,735

3,806,282

 


 

     

 


356,410

 


 

     

 

617,945

473,447

 


 

     

 

7,810,598

7,386,507

 


 

  Kevin G. McAllister

 

  Former Executive Vice President,

  President and Chief Executive Officer,

  Commercial Airplanes

     

2019
2018
2017


     

1,230,007
1,043,404
1,012,231


     

2,045,063

2,131,531

3,499,936

(8)

 
     


3,934,889

2,187,011


     



     

15,154,248

566,333

520,120


     

18,429,318

7,676,157

7,219,298


 

(1)

Amounts reflect base salary paid in the year, before any deferrals at the executive’s election and including salary increases effective during the year, if any. For Messrs. Muilenburg and McAllister, the amounts shown include $313,846 and $131,546, respectively, in payment of accrued but unused vacation in connection with them ceasing to be employed by the Company in 2019.

 

(2)

Amounts reflect the aggregate grant date fair value of PBRSUs and RSUs granted in the year computed in accordance with FASB ASC Topic 718. These amounts are not paid to or realized by the executive. If the maximum level of performance were to be achieved for the PBRSUs granted in 2019, the grant date value for those PBRSUs would be $7,245,862 for Mr. Muilenburg, $2,430,822 for Mr. Smith, $1,732,706 for Mr. Deal, $1,303,958 for Mr. Keating, $1,930,304 for Mr. Luttig, and $2,044,948 for Mr. McAllister. The grant date fair value of each PBRSU and RSU award in 2019 is set forth in the 2019 Grants of Plan-Based Awards table on page 53. Messrs. Muilenburg, Luttig, and McAllister forfeited some or all of these awards when they ceased being employed by the Company. For additional information, see footnotes 6-8 to this table.

 

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(3)

Amounts reflect (a) annual incentive compensation, which is based on Company and individual performance and (b) long-term incentive performance awards for the three-year performance period that ended in the relevant year, in each case including amounts deferred under our deferred compensation plan. For 2019, there were no payouts of annual incentive compensation or long-term performance awards. No payouts were made in common stock under the long-term incentive performance awards during any of the covered years. The following table sets forth the elements of “Non-Equity Incentive Plan Compensation.”

 

  Name    Year    Annual Incentive
Compensation ($)
   Long-Term Incentive
Performance Awards ($)
   Total Non-Equity Incentive
Plan Compensation ($)

  Dennis A. Muilenburg

       2019                     
       2018        5,432,350        7,644,000        13,076,350
       2017        5,752,520        2,697,750        8,450,270

  Gregory D. Smith

       2019                     
       2018        2,075,957        2,499,000        4,574,957
       2017        2,147,592        1,635,000        3,782,592

  Stanley A. Deal

       2019                     
       2018        1,391,487        681,345        2,072,832
       2017        1,292,736        490,500        1,783,236

  Timothy J. Keating

       2019                     

  J. Michael Luttig

       2019                     
       2018        1,753,235        2,572,500        4,325,735
       2017        1,953,282        1,853,000        3,806,282

  Kevin G. McAllister

       2019                     
         2018        1,811,621        2,123,268        3,934,889
      

 

2017

 

 

      

 

2,187,011

 

 

      

 

 

 

      

 

2,187,011

 

 

 

  

The estimated target and maximum amounts for annual incentive awards for 2019 and for performance awards granted in 2019 are reflected in the 2019 Grants of Plan-Based Awards table on page 53.

 

(4)

No defined benefits have accrued since the end of 2015. Amounts for 2019 and 2017 reflect aggregate increases in the actuarial present value of the executive’s accumulated benefits under all pension plans during the applicable year. No amount is included for 2018 because there was a decrease in the actuarial present value of the executives’ accumulated benefits for that year. These amounts were determined using interest rate and mortality rate assumptions consistent with those used in our audited financial statements. The degree of change in the present value depends on the age of the executive, when the benefit payments begin, and how long the benefits are expected to last. The interest rate used for determining our audited financial statements can fluctuate significantly, which can result in significant year-to-year changes in the present value of accumulated benefits. An executive’s actual pension value is determined at the time of benefit commencement under the terms of the applicable plan. For Mr. Luttig, the amount shown also includes a lump sum distribution of $3,510,688, pursuant to his supplemental pension agreement, which was paid upon his attainment of age 65 during 2019. Additional information regarding our pension plans, including Mr. Luttig’s supplemental pension agreement, is set forth under “2019 Pension Benefits” beginning on page 56. None of the NEOs received any earnings on their deferred compensation based on above-market or preferential rates.

 

(5)

The following table sets forth the elements of “All Other Compensation” provided in 2019 to our NEOs:

 

  Name    Perquisites and
Other Personal
Benefits ($)(a)
 

Life Insurance

Premiums

($)

   Company
Contributions to
Retirement
Plans ($)
   Separation
Payments(b)
  

Total All Other

Compensation

($)

  Dennis A. Muilenburg        310,417 (i)        4,590        1,885,087               2,200,094
  Gregory D. Smith        153,749 (ii)        3,056        388,211               545,016
  Stanley A. Deal        83,362 (iii)        10,550        614,284               708,196
  Timothy J. Keating        59,347 (iv)        3,850        272,646               335,843
  J. Michael Luttig        87,766 (v)        5,264        456,018               549,048
  Kevin G. McAllister        71,492 (vi)        4,941        327,815        14,750,000        15,154,248

 

  (a)

Perquisites and other personal benefits provided to one or more of our NEOs in 2019 consisted of use of Company aircraft for personal travel, including to attend outside board meetings, personal use of ground transportation services, relocation assistance, tax preparation and planning services, charitable gift matching, home security expenses, annual physicals and commemorative gifts. We determine the incremental cost to us for these benefits based on the actual costs or charges incurred. The incremental cost to us for use of Company aircraft equals the variable operating cost, including the cost of fuel, trip-related maintenance, crew travel expenses, on-board meals, landing fees, and parking costs. Year over year costs per statute mile increased by less than 1% in 2019. Since our aircraft are used predominantly for business travel, the calculation does not include costs that do not change based on usage, such as pilots’ salaries, aircraft acquisition costs, and the cost of maintenance not related to trips. The cost of any category of the listed perquisites and other personal benefits did not exceed the greater of $25,000 or 10% of total perquisites and other personal benefits for any NEO, except as follows: (i) $235,825 for use of Company aircraft for Mr. Muilenburg; (ii) $104,291 for use of Company aircraft and $30,000 in charitable gift matching donations for Mr. Smith; (iii) $56,097 for use of Company aircraft for Mr. Deal; (iv) $27,979 for use of Company aircraft for Mr. Keating; (v) $57,172 for use of Company aircraft for Mr. Luttig; and (vi) $39,263 for use of Company aircraft for Mr. McAllister.

 

  (b)

Mr. McAllister received a cash payment pursuant to his separation from the Company in 2019.

 

 

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(6)

Mr. Muilenburg retired from the Company in December 2019 and, in accordance with the terms of these awards, was eligible for pro-rated vesting based on his employment during the applicable performance or vesting period. If the maximum level of performance were to be achieved for the PBRSUs granted to Mr. Muilenburg in 2019 following application of the pro-ration, the grant date value for those PBRSUs would be $2,012,739. The grant date value for the RSUs granted to Mr. Muilenburg in February 2019 following application of the pro-ration would be $1,006,436.

 

(7)

Mr. Luttig retired from the Company in March 2020 and, in accordance with the terms of these awards, was eligible for pro-rated vesting based on his employment during the applicable performance or vesting period. If the maximum level of performance were to be achieved for the PBRSUs granted to Mr. Luttig in 2019 following application of the pro-ration, the grant date value for those PBRSUs would be $697,054. The grant date value for the RSUs granted to Mr. Luttig in 2019 following application of the pro-ration would be $348,547.

 

(8)

Mr. McAllister forfeited these awards when he ceased to be employed by the Company in 2019.

2019 Grants of Plan-Based Awards

 

The following table provides information for each of our NEOs regarding 2019 annual and long-term incentive award opportunities, including the range of potential payouts under our incentive plans. Specifically, the table presents the 2019 grants of annual incentive awards, performance awards, PBRSUs, and RSUs.

 

  Name   Type of Award           Grant        
Date
 

Committee

Action
Date(1)

 

Number
of Units
Granted

(#)

 

 

Estimated Future
Payouts Under Non-

Equity Incentive Plan
Awards(2)

  Estimated Future
Payouts Under Equity
Incentive Plan
Awards(3)
 

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units

(#)

 

Grant Date
Fair Value
of Stock
Awards

($)

 

Target

($)

  Maximum
($)
 

Threshold

(#)

 

Target

(#)

 

Maximum

(#)

  Dennis A. Muilenburg(4)   Annual Incentive                                 3,060,000       6,120,000                              
  Performance Award               72,463       7,246,300       14,492,600                              
  RSUs       02/25/2019       02/24/2019                                           8,461       3,623,169
  PBRSUs       02/25/2019       02/24/2019                         1,944       7,774       15,548             3,622,931
  Gregory D. Smith   Annual Incentive                     1,298,173       2,596,346                              
  Performance Award               24,310       2,431,000       4,862,000                              
  RSUs       02/25/2019       02/24/2019                                           2,838       1,215,288
  PBRSUs       02/25/2019       02/24/2019                         652       2,608       5,216             1,215,411
  Stanley A. Deal   Annual Incentive                     989,423       1,978,846                              
  Performance Award               17,325       1,732,500       3,465,000                              
  RSUs       02/25/2019       02/24/2019                                           2,023       866,289
  PBRSUs       02/25/2019       02/24/2019                         465       1,859       3,718             866,353
  Timothy J. Keating   Annual Incentive                     660,433       1,320,866                              
  Performance Award               13,036       1,303,600       2,607,200                              
  RSUs       02/25/2019       02/24/2019                                           4,000       1,712,880
  RSUs       02/25/2019       02/24/2019                                                         1,522         651,751  
  PBRSUs       02/25/2019       02/24/2019                           350       1,399       2,798             651,979
  J. Michael Luttig(4)   Annual Incentive                     1,082,823       2,165,646                              
  Performance Award               19,300       1,930,000       3,860,000                              
  RSUs       02/25/2019       02/24/2019                                           2,254       965,208
  PBRSUs       02/25/2019       02/24/2019                         518       2,071       4,142             965,152
  Kevin G. McAllister(4)   Annual Incentive                     1,208,308       2,416,615                              
  Performance Award               20,449       2,044,900       4,089,800                              
  RSUs       02/25/2019       02/24/2019                                           2,388       1,022,589
    PBRSUs

 

 

 

 

     

 

 

02/25/2019

 

 

 

 

     

 

 

02/24/2019

 

 

 

 

 

     

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

     

 

 

549

 

 

 

 

 

     

 

 

2,194

 

 

 

 

 

     

 

 

4,388

 

 

 

 

 

     

 

 

 

 

 

 

 

     

 

 

1,022,474

 

 

 

 

 

 

(1)

PBRSU and RSU awards that were approved by the Compensation Committee on Sunday, February 24, 2019 had a grant date of Monday, February 25, 2019, the first trading day following the date of the approval.

 

(2)

Payouts of annual incentive awards and performance awards may range from $0 to the applicable maximum as set forth above. Therefore, we have omitted the “Threshold” column. No annual incentive awards were paid to NEOs for 2019 performance.

 

(3)

PBRSUs pay out in shares of Boeing stock based on Boeing’s TSR over a three-year period (beginning and ending in February) relative to a peer group of competitors. TSR performance at less than the 20th percentile results in a 0% payout, with payouts increasing at 25% increments up to a maximum of 200% for performance exceeding the 91st percentile.

 

(4)

In connection with their separations from the Company, all or portions of these NEOs’ 2019 awards of PBRSUs, RSUs, and performance awards were forfeited. Of the awards granted in 2019, Mr. Muilenburg forfeited 6,111 unvested RSUs, 5,614 unvested PBRSUs (calculated assuming target performance), and unvested performance awards with a target value of $4,830,867 in connection with his retirement in December 2019. Of the awards granted in 2019, Mr. Luttig forfeited 1,440 unvested RSUs, 1,323 unvested PBRSUs (calculated assuming target performance), and unvested performance awards with a target value of $1,125,833 in connection with his retirement in March 2020. Mr. McAllister forfeited all his 2019 awards of PBRSUs, RSUs, and performance awards when he ceased to be employed by the Company in 2019.

Annual Incentive Awards

The amounts shown for annual incentive awards represent the target and maximum amounts of annual cash incentive compensation that, depending on Company and individual performance, might have been paid to each NEO for 2019 performance. As shown in the “Non-Equity Incentive Plan Compensation” column and corresponding footnote of the Summary Compensation Table on page 51, no annual incentive awards were paid to NEOs for 2019.

 

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Annual incentive awards, if payable, may be deferred at the election of the executive. If employment is terminated due to death, disability, layoff, or retirement during the year, the executive (or beneficiary) remains eligible to receive a pro-rated payout based on the number of days employed during the year. Upon any other type of employment termination, all rights to the annual incentive awards would terminate completely. Annual incentive awards are described in further detail beginning on page 38.

Performance Awards

The amounts shown for performance awards represent the target and maximum amounts that, depending on performance results, would be payable to each NEO pursuant to performance awards granted in 2019. The performance awards shown are units that pay out based on the achievement of the Company’s free cash flow, revenue, and core EPS performance goals for the three-year period ending December 31, 2021. Each unit has an initial target value of $100. The amount payable at the end of the three-year performance period may range from $0 to $200 per unit, depending on Company performance. The Compensation Committee has the discretion to pay these awards in cash, stock, or a combination of both. These awards may be deferred at the election of the executive. If employment is terminated due to death, disability, layoff, or retirement during the performance period, the executive (or beneficiary) remains eligible to receive a pro-rated payout based on the number of months employed during the period. Upon any other type of employment termination, all rights to the performance awards would terminate completely. Performance awards are described in further detail on page 39.

Performance-Based Restricted Stock Units

The amounts shown for PBRSUs represent the threshold, target, and maximum number of PBRSUs awarded to each NEO in 2019 and the grant date fair value of the PBRSUs determined in accordance with FASB ASC Topic 718. The grant date fair values are calculated using the average of the high and low prices on the grant date discounted to reflect the present value of future payments as well as the risks associated with the performance criteria. PBRSUs are earned based on Boeing’s TSR for the three-year performance period as measured against a group of peer companies set by the Compensation Committee. The final number of shares issuable at vesting pursuant to PBRSUs may range from 0% to 200% of the target amount depending on relative TSR performance. The threshold level of performance provides for payouts at 25% of target. If the threshold level is not achieved, no shares are issued. If employment is terminated due to death, disability, layoff, or retirement during the performance period, the executive (or beneficiary) remains eligible to receive a pro-rated amount of shares based on the number of months employed during the period. Upon any other type of employment termination, the PBRSUs would not vest and would be forfeited. PBRSUs are described in further detail on page 39.

Restricted Stock Units

The amounts shown for RSUs represent the number of RSUs awarded to each NEO in 2019 and the grant date fair value of the RSUs determined in accordance with FASB ASC Topic 718. The grant date fair values are calculated using the average of the high and low prices on the grant date. RSUs generally vest and settle on a one-for-one basis in shares of stock on the third anniversary of the grant date, except in the case of certain supplemental RSU awards. For RSUs granted as part of our long-term incentive program, if an executive terminates employment due to death, disability, layoff, or retirement, the executive (or beneficiary) would receive a pro-rated amount of stock units based on active employment during the three-year vesting period. Upon any other type of employment termination, the RSUs would not vest and would be forfeited. RSUs are described in further detail on page 39. Mr. Keating received a supplemental grant of 4,000 RSUs in February 2019 in recognition of strong performance and as a means of retention. These supplemental awards vest in full upon death, disability, or layoff, but are forfeited in their entirety if the executive retires or otherwise terminates prior to the end of the vesting period.

 

 

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Outstanding Equity Awards at 2019 Fiscal Year-End

 

The following table provides information regarding outstanding stock options and unvested stock awards held by each of our NEOs as of December 31, 2019. Market values for outstanding stock awards, which include 2019 grants and prior-year grants, are based on the closing price of Boeing stock on December 31, 2019 of $325.76. Performance awards, which are not stock-based but which may ultimately be paid in shares of common stock at the Compensation Committee’s discretion, are not presented in this table. Our last stock option grant was in 2013, and all outstanding options became exercisable by 2016.

 

    Option Awards       Stock Awards
  Name  

Grant

Year

 

Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable

  Option
Exercise
Price ($)
  Option
Expiration
Date
       Number of
Shares or Units
of Stock That
Have Not Vested
(#)(1)
  Market Value of
Shares or Units
of Stock That
Have Not Vested
($)(1)
  Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested (#)(2)
  Equity Incentive
Plan Awards:
Market Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested ($)(2)

  Dennis A. Muilenburg

                                              36,967 (3)        12,042,370
      2013       72,969       75.97       2/25/2023                            

  Gregory D. Smith

                                  64,762 (4)        21,096,869       14,385 (5)        4,686,058
      2013       19,402       75.97       2/25/2023                            

  Stanley A. Deal

 

                                  46,674 (6)        15,204,522       8,554 (7)        2,786,551

  Timothy J. Keating

                                  10,201 (8)        3,323,078       7,255 (9)        2,363,389
      2012       23,806       75.40       2/27/2022                            
      2011       21,737       71.44       2/22/2021                            

  J. Michael Luttig

                                  10,442 (10)        3,401,586       13,227 (11)        4,308,828

  Kevin G. McAllister(12)

                                                         

 

(1)

The following table shows the aggregate number and market value of unvested Career Shares, RSUs, and Matching Deferred Stock Units, or MDSUs, held by each of the NEOs as of December 31, 2019.

 

     Number of Shares or Units of Stock That
Have Not Vested (#)
     Market Value of Shares or Units of Stock That
Have Not Vested ($)
 
   Name    Career
Shares(a)
     RSUs      MDSUs(b)      Career
Shares(a)
     RSUs      MDSUs(b)  

 

   Dennis A. Muilenburg(c)

 

    

 

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

 

 

 

 

   Gregory D. Smith

 

    

 

 

 

 

    

 

64,762

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

21,096,869

 

 

 

    

 

 

 

 

 

   Stanley A. Deal

 

    

 

4,286

 

 

 

    

 

33,858

 

 

 

    

 

8,530

 

 

 

    

 

1,396,207

 

 

 

    

 

11,029,582

 

 

 

    

 

2,778,733

 

 

 

 

   Timothy J. Keating

 

    

 

 

 

 

    

 

10,201

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

3,323,078

 

 

 

  

 

   J. Michael Luttig

 

    

 

 

 

 

    

 

10,442

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

3,401,586

 

 

 

    

 

 

 

 

 

   Kevin G. McAllister(d)

 

    

 

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

 

 

 

    

 

 

 

 

 

  (a)

Career Shares, which were granted prior to 2006, earn dividend equivalents that accrue in the form of additional Career Shares. Career Shares vest upon termination of employment due to retirement, death, disability, or layoff and are paid out in stock upon vesting.

 

  (b)

Under the Matching Deferred Stock Units program, which was discontinued in 2005, if an executive elected to defer certain compensation into Boeing deferred stock units (an unfunded stock unit account), we provided a 25% matching contribution when the awards vested that will be paid out in stock upon termination of employment due to retirement, death, disability, or layoff. MDSUs earn dividend equivalents that accrue in the form of additional MDSUs. MDSUs are paid under our Deferred Compensation Plan for Employees, which is described in further detail under “2019 Nonqualified Deferred Compensation” on page 58.

 

  (c)

In connection with Mr. Muilenburg’s retirement in 2019, he fully vested in his Career Shares and MDSUs outstanding on his termination date, and vested pro-rata (based on his employment during the applicable vesting period) in his RSUs outstanding on his termination date. In accordance with the terms of the applicable awards, all remaining unvested RSUs were forfeited.

 

  (d)

In connection with Mr. McAllister’s separation in 2019, he forfeited all unvested RSUs outstanding on his termination date, in accordance with the terms of the applicable awards. Mr. McAllister did not have any Career Shares or MDSUs.

 

(2)

Assumes performance at (a) maximum for PBRSUs granted in 2017; (b) target for PBRSUs granted in 2018; and (c) threshold for PBRSUs granted in 2019.

 

(3)

Reflects (a) 30,463 PBRSUs that vested on February 24, 2020; (b) 5,955 PBRSUs that vest on or around February 2021; and (c) 549 PBRSUs that vest on or around February 2022, each of which reflects the pro-rated portion based on the number of months of employment during the applicable performance period. The remaining portions of PBRSUs were forfeited in connection with his retirement from the Company.

 

(4)

Reflects (a) 5,498 RSUs that vested on February 27, 2020; (b) 3,663 RSUs that vest on February 26, 2021; (c) 52,713 RSUs that vest on July 3, 2021; and (d) 2,888 RSUs that vest on February 25, 2022.

 

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(5)

Reflects (a) 10,333 PBRSUs that vested on February 24, 2020; (b) 3,389 PBRSUs that vest on or around February 2021; and (c) 663 PBRSUs that vest on or around February 2022.

 

(6)

Reflects (a) 4,286 Career Shares and 8,530 MDSUs that vest as described in footnote (1) above; (b) 16,657 RSUs that vested on February 27, 2020; (c) 1,866 RSUs that vest on February 26, 2021; (d) 13,277 RSUs that vest on February 27, 2021; and (e) 2,058 RSUs that vest on February 25, 2022.

 

(7)

Reflects (a) 6,354 PBRSUs that vested on February 24, 2020; (b) 1,727 PBRSUs that vest on or around February 2021; and (c) 473 PBRSUs that vest on or around February 2022.

 

(8)

Reflects (a) 2,786 RSUs that vested on February 27, 2020; (b) 1,797 RSUs that vest on February 26, 2021; and (c) 5,618 RSUs that vest on February 25, 2022.

 

(9)

Reflects (a) 5,236 PBRSUs that vested on February 24, 2020; (b) 1,663 PBRSUs that vest on or around February 2021; and (c) 356 PBRSUs that vest on or around February 2022.

 

(10)

Reflects (a) 5,408 RSUs that vested on February 27, 2020; (b) 2,740 RSUs that vest on February 26, 2021; and (c) 2,293 RSUs that vest on February 25, 2022, each of which reflects the pro-rated portion based on the number of months of employment during the applicable performance period. The remaining portions of PBRSUs were forfeited in connection with his retirement from the Company.

 

(11)

Reflects (a) 10,165 PBRSUs that vested on February 24, 2020; (b) 2,535 PBRSUs that vest on or around February 2021; and (c) 527 PBRSUs that vest on or around February 2022, each of which reflects the pro-rated portion based on the number of months of employment during the vesting period. The remaining portions of RSUs were forfeited in connection with his retirement from the Company.

 

(12)

Mr. McAllister forfeited all outstanding equity awards when he ceased to be employed by the Company in 2019.

Option Exercises and Stock Vested

 

The following table provides information for each of our NEOs regarding stock option exercises and vesting of stock awards during 2019.

 

     Stock Options         Stock Awards
Name    Number of Shares
Acquired on Exercise (#)
  

Value Realized

on Exercise ($)

        

Number of Shares

Acquired on Vesting (#)(1)